The Effect of Relocation on Risk Aversion

Abstract

ABSTRACT Risk preferences are one of the crucial parameters which can affect an individual's decisions. Thus, understanding the formation of risk preferences is crucial for comprehending economic behavior and its underlying factors. This paper examines the impact of family composition on risk preferences, with a particular focus on whether leaving the original household affects changes in risk preferences. Drawing on data collected from the National Survey of Tax and Benefits (NASTAB), a representative panel survey of households in Korea, the study finds that individuals who have moved out tend to exhibit lower levels of risk aversion. Moreover, there is variation in the impact of moving out observed over the years subsequent to relocation. Furthermore, employing measures of financial behavior, the study finds that individuals who have relocated are more inclined to purchase additional private insurance.

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