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The intergenerational transmission of risk attitudes: Evidence from Burkina Faso

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Abstract

This paper investigates the intergenerational transmission of risk attitudes in the context of a low income country with a focus on rural–urban and gender differences. Our empirical analysis is based on a household survey completed in Burkina Faso in 2014 which asks family members about their willingness to take risk in various domains. We find a positive correlation between parental and child risk attitudes, which is higher for risk in driving and risk in general than for risk in finance. For risk in driving and risk in general, the parent-child correlation is lower in rural area than in urban area. Also, we evidence gender-specific effects of parental risk attitudes. The intergenerational correlation in risk attitudes is higher for daughters than for sons, the father–daughter correlation is lower than the father–son correlation and the mother–daughter correlation is higher than the mother–son correlation.

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Notes

  1. For further evidence on the intergenerational transmission of tastes, see Cavalli-Sforza and Feldman (1981), Boyd and Richerson (1985) and Bisin and Verdier (2001).

  2. Using data from Germany, Dohmen et al. (2012) assess the relevance of three dimensions of the attitude transmission process: transmission attitudes from parents to children, prevailing attitudes in local environment and positive assortative mating of parents. The child’s willingness to take risk is an increasing function of the parental willingness to take risk such that an increase in parental risk attitudes by one standard deviation leads to an increase in child risk attitudes by around 0.3.

  3. With the same data, Sephavand and Shahbazian (2017) also study the intergenerational transmission of risk attitudes in Burkina Faso within a three-generations framework.

  4. See http://data.worldbank.org/country/burkina-faso?view=chart. Based on the gross national income per capita, the World Bank classifies countries as low-income, lower-middle-income, upper-middle-income, or high-income.

  5. See http://hdr.undp.org/en/countries/profiles/BFA. Gross enrollment ratios have increased in Burkina Faso over the recent period, from 45.0% in 2000 to 86.7% in 2014 for primary education and from 10.4% in 2000 to 30.3% in 2014 for secondary education.

  6. The various datasets associated to the LSMS-ISA surveys are publicly available online at the following url: http://microdata.worldbank.org/index.php/catalog/2538.

  7. In 2017, the number of deaths due to road traffic accidents in Burkina Faso was 5561. This corresponds to one of every 25 deaths in the country. See http://causesofdeathin.com/road-traffic-accidents-in-burkina-faso/.

  8. The proportions of households with a motorcycle is higher in urban areas than in rural areas (58.7% against 39.8%), while the opposite is found for cycle ownership (85.6% in rural areas against 68.8% in urban areas).

  9. We exclude observations with missing information on gender (N = 36), individuals aged below 18 and above 80 (N = 586), missing values concerning relationship to household head (N = 14), marital status (N = 84), religion (N = 69) and education (N = 6).

  10. There are substantial changes in risk attitudes by region of residence in Burkina Faso. The highest average for risk in driving is observed in Cascades located on the south-west of Burkina Faso, while the lowest averages are found in Centre-Est and Hauts-Bassins. The highest averages for risk in general are found in Cascade (4.9), Centre-Ouest (4.9) and Sud-Ouest (4.7), these three regions being located in the south of Burkina Faso.

  11. In case of polygamy, we consider the wife with the first rank in the household roster. There is no information for each child on who is the natural mother and who are the stepmothers.

  12. For the sake of robustness, we have also estimated random effect ordered models for each regression and reach very similar conclusions. Results are available upon request.

  13. The detailed estimates for the other covariates, available upon request, are not reported.

  14. Note that the dummy variable \(\Bbb{r}\) is also included in our control variables Xhp since we account for the rural–urban location in our regressions.

  15. Again, the dummy variable \({\Bbb{d}}\) is part of the control variables Xhp.

  16. However, controlling for household unobserved heterogeneity has a strong influence on the results. In a linear model without random effects, we obtain very similar coefficients for the paternal and maternal risk score for risk in driving, while the father’s coefficient is lower than the mother’s coefficient for risk in general.

  17. But as noted in de Brauw and Eozenou (2014), little is known about their risk preferences.

  18. The study of Charness and Viceisza (2016) raises the central methodological issue of the effectiveness of different sorts of risk-elicitation mechanisms in low income countries. Sanou et al. (2018) and Walelign et al. (2018) also investigate whether risk attitudes are robust to different experimental payoffs.

  19. The suggestion of a reviewer on this issue is gratefully acknowledged.

  20. Nevertheless, these results have to be interpreted with caution because the number of children is potentially endogenous to parental risk preferences.

  21. For risk in general, the marginal effect of parental risk attitudes is 0.583 without household income (t = 45.52) and 0.581 with household income (t = 45.25).

  22. Again, this constraint stems from the structure of the data since the EMC-BF survey only interviews family members who live in the same dwelling as the household head.

  23. We are not aware of any studies having examined the effect of risk attitudes on the decisions of young adults to leave the parental home.

  24. Due to the presence of polygamous households, Burkina Faso offers an interesting setting to study the role of nature versus nurture. However, in the EMCBF survey, the household roster does not include the exact links between each child and his or her mother or stepmothers, so that we cannot investigate whether there is some specific correlation in risk preferences between children and stepmothers.

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Acknowledgements

I would like to thank two anonymous reviewers and the co-editor, Charles Yuji Horioka, for their very helpful comments and suggestions on previous drafts. Any remaining errors are mine.

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  1. LEMNA, Université de Nantes, BP 52231 Chemin de la Censive du Tertre, 44322, Nantes Cedex, France

    François-Charles Wolff

  2. INED, Paris, France

    François-Charles Wolff

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Wolff, FC. The intergenerational transmission of risk attitudes: Evidence from Burkina Faso. Rev Econ Household 18, 181–206 (2020). https://doi.org/10.1007/s11150-019-09445-2

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