The Impact of Exposure to Political Violence on Risk and Ambiguity Attitudes
(University of Warwick-SU)
24 March 2021
Abstract : We conduct an incentive-compatible field experiment with a large representative sample to study how exposure to political violence in a civil conflict context affects risk and ambiguity preferences of individuals. We identify random exposure to violence by relying on a natural experiment in Turkey created by the military institutions and the long running civil conflict in the country. We show that the effect of violence exposure on risk and ambiguity preferences depend on the type of exposure. We find that while being exposed to the conflict environment induces individuals to become more risk-tolerant, having traumatic direct experiences in that environment creates the opposite effect and renders individuals extremely risk averse. Such individuals also become more averse to ambiguity. We also show that time of exposure should be considered in determining the overall effects. Overall our findings indicate that preferences on risk and ambiguity are history-dependent.