ZEF Public Lecture: Temporal Stability of Risk Attitudes and the Impact of Adverse Shocks - A Panel Data Analysis from Thailand and Vietnam

May 4, 2023 | 13:30 h - 14:30 h

We'd like to invite you to ZEF's Public Lecture!

Topic: "Temporal Stability of Risk Attitudes and the Impact of Adverse Shocks - A Panel Data Analysis from Thailand and Vietnam"

Speaker: by Prof. Sabine Liebenehm (Assistant Professor, University of Saskatchewan)

The lecture will be held in hybrid mode, so you are also welcome to join us online via Zoom: https://uni-bonn.zoom.us/j/66999686598?pwd=NGRGWWhHTEJIbVpGQWpxd3BheGl1QT09

Summary

Exogenous negative shocks and intrinsic risk attitudes are two important elements characterizing the vicious cycle of poverty associated with rural households in developing countries. Recent empirical studies suggest that adverse shocks—a key driver of poverty—can trigger substantial changes in the risk attitudes of poor people, leading to decisions that perpetuate their lives in poverty. Although the temporal variability of risk attitudes is a controversial topic, the literature advocating the temporal variability of risk attitudes suggests that covariate shocks, such as natural disasters, alter risk attitudes over time, whereas idiosyncratic shocks show no such significant impact.

This paper aims to test the temporal stability of risk attitudes in rural households in Thailand and Vietnam to determine whether this pattern—covariate shocks that affect risk attitudes and idiosyncratic shocks that do not—can be confirmed for these households. I use an exogenous measure of shocks to explain temporal variation in risk attitudes. Thus, I estimate variation in consumption using a multilevel model in which variation in consumption at the individual level serves as a proxy for idiosyncratic shocks, while variation in consumption at the aggregate level is used to measure covariate shocks.

My study finds temporal variability in risk attitudes that is driven by covariate shocks in Vietnam and—in contrast to past research—by idiosyncratic shocks in Thailand. The results suggest that Vietnamese respondents may be better in insuring idiosyncratic risks for example through safety nets, while mutual insurance across individuals does not seem to work well in Thailand. In addition, results indicate that the mutual insurance problem in Thailand seems to increase in wealth. The differences that I find between Thailand and Vietnam and across poverty types correspond to the difference in political systems and consequently the focus of socio-political measures. Thailand’s recent political volatility and the growing lack of social cohesion in Thai society support these findings.

Biography:

Sabine Liebenehm is an Assistant Professor in Agricultural and Development Economics with a joined appointment with the Agricultural and Resource Economics Department and the Economics Department at the University of Saskatchewan. Sabine obtained her PhD from the Leibniz University Hannover, Germany. In her research, Sabine seeks to improve the understanding of the economic decision-making among households living in rural and remote settings often exposed to an adverse environment with limited access to formal safety net mechanisms. She focuses on two aspects that determine the risk management decision: (i) the impact of adverse risks, and (ii) the interaction with people’s preferences and perceptions. To assess the research questions, Sabine applies empirical microeconomic strategies, leveraging rich data sets obtained from household surveys, lab-in-the-field experiments, social network studies, and climate data observations. Geographically, Sabine works primarily with rural agricultural households in Southeast Asia and West Africa, and more recently with remote First Nation communities in Northern Canada.