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Impact of Violent Crime on Risk Aversion: Evidence from the Mexican Drug War

Ryan Brown1; Verónica Montalva2; Duncan Thomas3; Andrea Velásquez1

1 University of Colorado Denver · 2 Inter-American Development Bank · 3 Duke University

The Review of Economics and Statistics 2019 open access

Whereas attitudes toward risk play an important role in many decisions over the life course, factors that affect those attitudes are not fully understood. Using longitudinal survey data collected in Mexico before and during the Mexican war on drugs, we investigate how risk attitudes change with variation in insecurity and uncertainty brought on by unprecedented changes in local-area violent crime. Exploiting the fact that the timing, virulence, and spatial distribution of changes in violent crime were unanticipated, we establish there is a rise in risk aversion spread across the entire local population as local-area violent crime increases.

DOI
10.1162/rest_a_00788
Volume
101 (5)
Pages
892-904
Language
en
Export
BibTeX
Sources
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