Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/185276 
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11816
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This research explores the origins of loss aversion and the variation in its prevalence across regions, nations and ethnic group. It advances the hypothesis and establishes empirically that the evolution of loss aversion in the course of human history can be traced to the adaptation of individuals to the asymmetric effects of climatic shocks on reproductive success during the Malthusian epoch in which subsistence consumption was a binding constraint. Exploiting regional variations in the vulnerability to climatic shocks and their exogenous changes in the course of the Columbian Exchange, the research establishes that consistent with the predictions of the theory, individuals and ethnic groups that are originated in regions marked by greater climatic volatility have higher predisposition towards loss-neutrality, while descendants of regions in which climatic conditions tended to be spatially correlated, and thus shocks were aggregate in nature, are characterized by greater intensity of loss aversion.
Subjects: 
loss aversion
cultural evolution
evolution of preferences
natural selection
Malthusian epoch
growth
development
JEL: 
D81
D91
Z10
O10
O40
Document Type: 
Working Paper

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