Risk Preferences in the PSID: Individual Imputations and Family Covariation

Miles S. Kimball, Claudia R. Sahm, Matthew D. Shapiro

NBER Working Paper No. 14754
Issued in February 2009
NBER Program(s):   AP   EFG   ME

Survey measures of preference parameters provide a means for accounting for otherwise unobserved heterogeneity.This paper presents measures of relative risk tolerance based on responses to survey questions about hypothetical gambles over lifetime income.It discusses how to impute estimates of utility function parameters from the survey responses using a statistical model that accounts for survey response error. There is substantial heterogeneity in true preference parameters even after survey response error is taken into account.The paper discusses how to use the preference parameters imputed from the survey responses in regression models as a control for differences in preferences across individuals. This paper focuses on imputations for respondents in the Panel Study of Income Dynamics (PSID).It also studies the covariation of risk preferences among members of households.It finds fairly strong covariation in attitudes about risk -- between parents and children and especially between siblings and between spouses.

download in pdf format
   (162 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14754

Published: Miles S. Kimball & Claudia R. Sahm & Matthew D. Shapiro, 2009. "Risk Preferences in the PSID: Individual Imputations and Family Covariation," American Economic Review, American Economic Association, vol. 99(2), pages 363-68, May. citation courtesy of

Users who downloaded this paper also downloaded these:
Kimball, Sahm, and Shapiro w13337 Imputing Risk Tolerance from Survey Responses
Barsky, Kimball, Juster, and Shapiro w5213 Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey
Charles and Hurst w9314 The Correlation of Welath Across Generations
Kimball and Shapiro w14208 Labor Supply: Are the Income and Substitution Effects Both Large or Both Small?
Einav, Finkelstein, Pascu, and Cullen w15686 How general are risk preferences? Choices under uncertainty in different domains.
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us