A Thai village study finds wide variation in risk attitudes, suggesting that policy to smooth economic volatility may need to be nuanced. “Heterogeneity and Risk Sharing in Village Economies” (Minneapolis Fed Working Paper 683, January 2011, Pierre-André Chiappori, Krislert Samphantharak, Sam Schulhofer-Wohl, and Robert M. Townsend) looks at differences in risk aversion among households in four rural provinces in Thailand. The authors discover a rich complexity of village economics and a wide range of preferences regarding risk: Some households have an extreme aversion to it; others welcome it. The research further suggests that before policymakers seek to address poverty by mitigating fluctuations that impose hardships on some villagers, they need to consider this variability. A number of households, the researchers indicate, might actually benefit from volatility in village income.
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