The Intergenerational Transmission of Risk Preference : Evidence from Parental Earthquake Experiences

This paper provides the first empirical analysis on whether and how intergenerational transmission affects children's risk preferences by exploiting exogenous variation in parents' risk preferences. We utilize parents' experiences to earthquakes---one of the most unpredictable natural disasters---to exploit exogenous variations in their risk preferences. Based on a nationally representative sample of children who did not directly experience earthquakes combined with a hypothetical experimental risk aversion measure from China, we find that the parents' earthquake experiences significantly increase their children's risk aversion. Moreover, the effect from the mother's side is more prominent than father's side. Credible evidence about parental vertical socialization suggests that intergenerational transmission is the primary mechanism