Understanding the formation of risk preferences is crucial for elucidating the roots of economic, social, and health inequalities. However, this area remains inadequately explored. This study employs a risk preference measure directly linked to the labor market to examine whether previous experiences with high unemployment rates influence current risk decision-making among the elderly, and whether this impact varies by genotype. The findings indicate that individuals with low genetic predispositions for risk tolerance are more significantly influenced by historical fluctuations in unemployment rates than those with high genetic predispositions for risk tolerance. Consequently, this paper identifies genetic endowment as a crucial moderating factor that shapes how past experiences impact current decision-making processes. This disparity in how past experiences shape risk preferences based on genetic predisposition may further amplify inequalities in health, wealth, income, and other outcomes associated with risk preferences.
The Effect of Public Health Insurance on Risk Aversion
Understanding the drivers of risk preferences is crucial, as these preferences shape decisions with significant economic and social implications. This study examines the impact of Medicare health insurance on individual risk preferences, employing a regression discontinuity design around the age 65 eligibility cutoff. Using data from the Health and Retirement Study (HRS), we find that Medicare enrollment significantly reduces risk aversion, supporting the theory that lower background risk encourages greater risk tolerance. Our findings show that this shift minimally affects health behaviors but substantially increases financial risk-taking, particularly in stockholding. These results underscore the broader economic influence of health insurance policies, suggesting that public health insurance can promote economic growth by indirectly shaping risk preferences.
Beyond Test Scores: The Effect of School Entry Age on Cognitive Processes
This paper examines how school starting age affects the development of specific cognitive skills that underpin human capital formation. We link school entry timing to narrow cognitive abilities—most notably inductive reasoning and learning effectiveness—using high-resolution psychometric data from children aged 8 to 13 in the Czech Republic. To estimate the causal effect of school starting age, we exploit a cutoff rule that assigns school eligibility based on month of birth, and implement a regression discontinuity design. We estimate the intention-to-treat (ITT) effect of starting school later, and use variation in fixed effects to gain interpretive leverage on underlying mechanisms. We find that delayed entry improves both cognitive skills when comparing children within the same grade, but only enhances learning effectiveness when comparing children of the same age across grades. This pattern suggests that maturity drives gains in reasoning, while instruction contributes to learning effectiveness. The effects are stronger for boys and children from lower-educated families, indicating that delayed entry may serve as a compensatory input for disadvantaged groups. Our findings offer new evidence on the cognitive channels through which early schooling decisions affect long-run skill development.