← Search

American Economic Review Vol. 100 No. 3 2010

Are Risk Aversion and Impatience Related to Cognitive Ability?

Thomas Dohmen1; Armin Falk2; David Huffman3; Uwe Sunde4

1 Research Centre for Education and the Labour Market, Maastricht University, Tongersestraat 53, 6211 LM Maastricht, Netherlands. · 2 Department of Economics, University of Bonn, Adenauerallee 24-42, 53113 Bonn, Germany. · 3 Department of Economics, Swarthmore College, 500 College Avenue, Swarthmore, PA 19081-1397. · 4 Department of Economics, University of St. Gallen, Varnbuelstr. 14, 9000 St. Gallen, Switzerland.

Abstract

This paper investigates whether there is a link between cognitive ability, risk aversion, and impatience, using a representative sample of roughly 1,000 German adults. Subjects participate in choice experiments with monetary incentives measuring risk aversion, and impatience over an annual horizon, and conduct two different, widely used, tests of cognitive ability. We find that lower cognitive ability is associated with greater risk aversion, and more pronounced impatience. These relationships are significant, and robust to controlling for personal characteristics, education, income, and measures of credit constraints. We perform a series of additional robustness checks, which help rule out other possible confounds.

DOI
10.1257/aer.100.3.1238
Volume
100
Issue
3
Pages
1238-1260
Language
en
Sources
bibtex:phds-export.bib crossref openalex

Cite