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Charles Noussair, Stefan Trautmann, Gijs van de Kuilen, and
Nathanael Vellekoop
Tilburg University
Risk and Choice: Conference in honor of Louis Eeckhoudt
Toulouse, 2012
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We report direct evidence of a relationship between
religiosity and risk aversion
Confine our attention to Protestants and Catholics
We use an incentivized experimental measure of risk
aversion.
Participants are drawn from a demographically
representative sample of the Dutch population.
We have data about own and parents’ church
attendance, frequency of prayer, denomination, and
own specific religious beliefs, at the individual level.
Using our direct measure of risk aversion, we
◦ Study the relationship between risk aversion and religiosity
◦ Test for differences between Protestants and Catholics.
◦ Consider whether risk aversion correlates with beliefs
and/or social aspects of religious practice.
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Weber (1905) postulated an association between
Protestantism and economic development in the West.
Empirical work suggests a relationship between religion and
economic performance (Barro and McCleary, 2003, 2006;
Guiso et al., 2003, 2006).
◦ Barro and McCleary find that growth is positively associated
with religious beliefs but negatively associated with church
attendence.
◦ Guiso et al., find that religious beliefs are associated with
attitudes conducive to economic growth (cooperation,
thriftiness, value of work, etc...)
One mechanism whereby the effect of religion on the
economy could operate is via a correlation with risk attitudes.
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A number of studies have found a positive
correlation between religiosity and risk aversion
(Miller and Hoffmann, 1995; Liu, 2010; Dohmen
et al., 2011, Hillary and Hui, 2009).
There is a negative correlation between religiosity
and gambling (Hoffmann, 2000; Diaz, 2000;
Ellison and McFarland, 2011).
The evidence on Catholic and Protestant
differences is mixed:
◦ Kumar et al. (2011), Barsky et al. (1997) and Benjamin
et al. (2010) find that Protestants are more risk averse or
make safer financial investments than Catholics.
◦ Renneboog and Spaenjers, (2011) and Dohmen et al.
(2011) observe the opposite.
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Characterized by religious diversity,
◦ Just over half of the population (51.6%) report an affiliation
to an established religion.
◦ 27% are members of the Catholic Church, while 16.6% are
members of a Protestant denomination.
◦ The southern and southeastern regions of the country, have
a strong Catholic majority; the southwest and northeast
have a clear Protestant majority.
Religious identity has historically been important, due, among
other factors, to
◦ the regional division,
◦ the role of Protestantism in the original war for independence against
Spain in the 16th and 17th centuries, and
◦ the fact that the Netherlands has at times served as a refuge for
Protestants from other countries.
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There are Muslim and Hindu minorities comprising roughly
6% and 1.3% of the population respectively.
Eastern Orthodox and Jewish communities each comprise .2%
of population
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We use data from the LISS panel, managed by
CentERdata, an organization affiliated with
Tilburg University.
The LISS panel consists of approximately 9000
demographically representative individuals, who
complete a questionnaire over the internet each
month.
Respondents are reimbursed for the costs of
completing the questionnaires four times a year.
Additionally, incentivized economic experiments
are conducted routinely on the LISS panel.
2631 participated in this particular study
Summary Statistics
mean/% Catholics
Member of religious group
42.5%
Parents members
66.1%
94.8%
Roman Catholic
21.8%
Protestant
16.4%
Attendance >1 per week
3.9%
1.1%
Attendance =1 per week
6.9%
6.4%
Attendance =1 per month
7.1%
14.8%
Attendance >1 per week (age 15)
10.9%
13.4%
Attendance =1 per week (age 15)
31.7%
55.7%
Attendance =1 per month (age 15)
6.9%
6.8%
Pray >1 per week
25.7%
36.0%
Pray =1 per week
3.7%
7.2%
Pray =1 per month
5.1%
10.5%
Degree belief in God (min 1, max 6)
3.48
4.40
Belief indicators (min 0, max 7)
2.36
2.93
Female
52.2%
53.9%
Age
49.02
53.78
Protestants
Observations:
93.8%
Church membership
declining.
13.7%
27.2%
17.7%
23.8%
45.2%
8.3%
68.0%
5.2%
4.2%
5.10
5.58
56.3%
53.24
Protestants attend
church more, pray
more, and are
stronger believers
than Catholics
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Consider lottery L, which yields:
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Subjects made pairwise choices between lottery L
and:
◦ 65 Euro with prob. .5
◦ 5 Euro with prob. .5
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◦
◦
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20 Euro
25 Euro
…
40 Euro
Counterbalanced with respect to order and position
The number of safe choices is interpreted as a
measure of risk aversion
◦ 1.5 safe choices corresponds to risk neutrality
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2631 observations, 1047 had real payments, the rest
had hypothetical payments
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Two measures of strength of religious beliefs:
◦ Seven yes/no questions:
 Do you believe in (i) life after death, (ii) the Bible as the
word of God, the existence of (iii) heaven,, (iv) hell, (v)
the devil, (vi) Adam and Eve, and (vii) that it makes
sense to pray.
◦ Self-identify on scale from 1 – 7:
 Scale goes from “I do not believe in God = 1” to “I
believe without any doubt in God = 7.”
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Practice:
◦ Frequency of church attendance
◦ Frequency of prayer outside of church
: Parental and Own Church Membership
Parents in church
Yes
Yes
No
No
Subject in church
Yes
No
Yes
No
# obs.
1016
665
69
798
Avg. safe choices (0 -5)
3.49
3.35
3.55
3.34
Church members are more risk averse than nonmembers
There is no difference in risk aversion depending on
whether one’s parents were church members of not.
Service attendance
Attendance
Current
More than once a week
Once a week
Once a month
Less often
During Childhood: at age 15
More than once a week
Once a week
Once a month
Less often
# obs.
Avg. risk aversion (0-5)
101
180
185
2154
3.77
3.59
3.35
3.39
286
828
180
1321
3.43
3.42
3.37
3.42
Greater current church attendance is associated with greater risk
aversion
Risk aversion, Church Membership and Attendance
Controls A
Controls B
Church membership
Own
N
All
Yes
No
.231 (1.81)*
2586
All
Yes
Yes
.280 (2.09)**
2341
Real
Yes
No
.412 (2.24)**
1024
Real
Yes
Yes
.489 (2.47)**
925
Attendance
>1 per week
≈1 per week
≈1 per month
N
.626 (1.97)**
.624 (1.97)**
1.074 (2.28)**
.930 (1.90)*
.361 (1.43)
.436 (1.63)
.301 (.82)
.487 (1.21)
-.005 (.02)
.053 (.21)
.263 (.81)
.42 (1.20)
2620
2369
1042
940
Controls A: gender, age, treatment, and counterbalancing in
the presentation.
Controls B: marital status, number of children, income,
homeownership and health status, educational and
occupational status, and whether one has a Dutch passport.
Risk aversion and denomination
Controls A
Controls B
All subjects
Roman Catholic
Protestant
Other Faiths
N
(Catholic)=(Protestant)
Catholic & Protestant
Catholic
N
All
Yes
No
All
Yes
Yes
.250 (1.61)
.246 (1.52)
.184 (1.03)
.332 (1.77)*
.207 (.69)
2581
F=.11
Real
Yes
No
Real
Yes
Yes
.283 (1.22)
.208 (1.12)
2338
F=.17
.284 (1.30)
.548 (2.10)**
.384 (.87)
1020
F=.85
.047 (.24)
-.122 (2.01)**
-.306 (1.10)
-.602 (7.10)***
985
897
396
360
.829 (2.93)***
.324 (.66)
922
F=3.18*
Notes: dependent variable: risk aversion; tobit regressions, coefficients reported, t-values based on robust s.e. in parenthesis; */**/*** indicate significance at
10%, 5% and 1% level.
Controls A: gender, age, treatment, and counterbalancing in the
presentation.
Controls B: marital status, number of children, income, homeownership
and health status, educational and occupational status, and whether one
has a Dutch passport.
Risk aversion and beliefs
Controls A
Controls B
Religious belief indicator
stronger belief
N
All
Yes
No
All
Yes
Yes
.037 (1.00)
1037
.046 (1.12)
934
Real
Yes
No
.051 (.87)
408
Real
Yes
Yes
.068 (1.06)
364
Degree of belief in God
stronger belief
N
.024 (.71)
2629
.040 (1.10)
2377
.043 (.88)
1046
.040 (.75)
944
Strength of religious beliefs has no significant relation
with risk aversion
We have seen earlier that church attendance predicts
risk aversion
This suggests that it is the social aspect of church
membership that is related to risk aversion
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In our sample, risk aversion is positively
associated with religiosity
Given current religiosity, parents’ level in
one’s childhood has no effect.
Protestants are more risk averse than
Catholics
The correlation appears to be related to the
belonging rather than the believing aspects of
religious practice.
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