Children's Preferences

EXPERIMENTAL EVIDENCE ON HOW MUCH THEY LEARN FROM THEIR PARENTS

Boys take more risks than girls. Socio-economic background does not affect children’s risk-taking behaviour. And girls’ attitudes to risk-taking are heavily influenced by the attitudes of their mothers, while boys are not. These are among the conclusions of experimental research by Seda Ertac and colleagues, presented at the Royal Economic Society’s 2013 annual conference.

Does risk-taking run in the family? That is essentially the question addressed in this study. Attitudes such as risk tolerance, patience and the propensity to trust others are important determinants of socio-economic choices and outcomes.

How risk-tolerant you are affects many everyday life choices, ranging from the financial portfolio you hold, to whether you smoke to how recklessly you drive. Moreover, we know that many economic choices and outcomes are highly persistent across generations within families.

But what makes a person more or less likely to take risks? Is risk tolerance as an economic attitude transmitted from parents to children, and if so, what is the mechanism? Is it the genes you get from your parents, or is it socialisation within the family? The results from this experimental study reveal that socialisation plays an important role.

The questions the researchers pose are as relevant to psychology as they are to economics. They have access to a rich dataset compiled by psychologists over the course of five years in a nationally representative sample in Turkey, studying the early childhood environment and its effects on child development starting from the age of 3.

This dataset tells us many valuable and detailed characteristics about a child’s life, such as how wealthy the family is, the quality and quantity of time the parents spend with the child, cultural and religious background of the family, the mother’s parenting style etc.

To understand how these characteristics affect risk tolerance, economists need a measure of risk preference. A recently popular methodology in economics is to gather data through experiments, where economic scenarios are presented to participants and they are asked to make decisions that bring real rewards.

In a sample of 7-8 year-olds, the reward was toys. The kids were told that they had four tokens that were theirs, and each token meant they could get one toy (the more tokens, the more toys). If they wanted, they could put some or none or all of them into a risky bowl. If the child drew a purple ball from a bag (50% chance) the tokens in the risky bowl would be lost. If the child drew a yellow ball from a bag (50% chance) the tokens in the risky bowl would be tripled. A similar experiment was done with the mothers but with monetary rewards instead of toys.

The researchers played the risk game with 750 mothers and their children and the results reveal the following:

  • Overall, boys take more risks than girls. This is consistent with what we usually see with adults: women are more risk averse.
  • Whether or not the children were from a poor or rich household did not affect their risk taking behaviour.
  • In terms of whether risk-taking is passed from mothers to children, girls are influenced heavily by the attitudes of their mothers, while boys are not.

The reason for this gender difference could be that especially in a gender-segregated society, girls are more likely than boys to view mothers as a role model. Alternatively, there could be a stronger biological transmission between mothers and daughters than mothers and sons. Finally, mothers who spend more quality time and put better effort into raising their daughters are better able to influence their preferences towards risk.

This suggests that socialisation indeed does matter in the intergenerational transmission of preferences. For working mothers, this is also some good news: whether or not the mother works does not affect the degree to which her preferences are transmitted. What really matters is the quality of the time spent with the child.

ENDS


Notes for editors:

‘The Emergence of Risk Preferences in Children’ by Sule Alan (Koc University), Nazli Baydar (Koc University), Teodora Boneva (University of Cambridge), Thomas Crossley (University of Cambridge, Koc University, Institute for Fiscal Studies, London) and Seda Ertac (Koc University).

Contact:

RES media consultant Romesh Vaitilingam:
+44 (0) 7768 661095
romesh@vaitilingam.com
@econromesh


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