Journal Article

The Intergenerational Transmission of Risk and Trust Attitudes

Thomas Dohmen, Armin Falk, David Huffman and Uwe Sunde

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 79, issue 2, pages 645-677
Published in print April 2012 | ISSN: 0034-6527
Published online November 2011 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rdr027
The Intergenerational Transmission of Risk and Trust Attitudes

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Recent theories endogenize the attitude endowments of individuals, assuming that they are shaped by the attitudes of parents and other role models. This paper tests empirically for the relevance of three aspects of the attitude transmission process highlighted in this theoretical literature: (1) transmission of attitudes from parents to children; (2) an impact of prevailing attitudes in the local environment on child attitudes; and (3) positive assortative mating of parents, which enhances the ability of a parent to pass on his or her attitudes to the child. We focus on two fundamentally important attitudes, willingness to take risks and willingness to trust others. We find empirical support for all three aspects, providing an empirical underpinning for the literature. An investigation of underlying mechanisms shows that socialization is important in the transmission process. Various parental characteristics and aspects of family structure are found to strengthen the socialization process, with implications for modeling the socialization production function and for policies focused on affecting children's non-cognitive skills. The paper also provides evidence that the transmission of risk and trust attitudes affects a wide variety of child outcomes, implying a potentially large total effect on children's economic situation.

Keywords: Risk preferences; Trust; Intergenerational transmission; Cultural economics; Family economics; Assortative mating; Social interactions; SOEPD1; D80; J12; J13; J62; Z13

Journal Article.  16745 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Demographic Economics ; Economic Sociology ; Mobility, Unemployment, and Vacancies

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