Risk aversion, time preference and health production: Theory and empirical evidence from Cambodia
Economics and Human Biology , Volume 17 p. 1- 15
This paper quantifies the relationship between risk aversion and discount rates on the one hand and height and weight on the other. It studies this link in the context of poor households in Cambodia. Evidence is based on an original dataset that contains both experimental measures of risk taking and impatience along with anthropometric measurements of children and adults. The aim of the paper is to (i) explore the importance of risk and time preferences in explaining undernutrition and (ii) compare the evidence stemming from poor households to strikingly similar findings from industrialized countries. It uses an inter-generational approach to explain observed correlations in adults and children that is inspired by the height premium on labor markets. Parents can invest in the health capital of their child to increase future earnings and their consumption when old: better nutrition during infancy translates into better human capital and better wages, and ultimately better financial means to take care of elderly parents. However this investment is subject to considerable uncertainty, since parents neither perfectly foresee economic conditions when the child starts earning nor fully observe the ability to transform nutritional investments into long-term health capital. As a result, risk taking households have taller and heavier children. Conversely, impatience does not affect child health. In the case of adults, only weight and the body mass index (BMI), but not height, are positively and moderately correlated with risk taking and impatience.
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|Economics and Human Biology|
|Organisation||Erasmus University Rotterdam|
Rieger, M. (2015). Risk aversion, time preference and health production: Theory and empirical evidence from Cambodia. Economics and Human Biology, 17, 1–15. doi:10.1016/j.ehb.2014.12.001