Econ professor publishes in top journal
Professor Morten I. Lau from the Department of Economics has co-authored a new study, Structural Estimation of Higher Order Risk Preferences, which is now out in Econometrica, a leading economics journal. The article, written with Hong Il Yoo from Loughborough University, introduces a novel method for measuring how individuals handle complex risks, focusing on two higher-order risk preferences: prudence (preference for precaution) and temperance (preference for moderation in risk exposure). The results show that these preferences vary significantly across income levels and are not well captured by standard economic models of choice under risk. For policymakers, the findings highlight that financial, savings, and insurance policies may be more effective when they consider not only whether people dislike risk, but also how they adjust their decisions in response to its form and complexity.
The article can be accessed in the September issue of Econometrica: https://www.econometricsociety.org/publications/econometrica