Munich Risk and Insurance Center

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Project 1: Peer Effects in Risk Taking: Evidence from Germany

Contact: Mark J. Browne, Annette Hofmann, Andreas Richter, Sophie-Madeleine Roth, Petra Steinorth

Empirical evidence on the behavioral consequences of interaction with peer groups on individual risk preferences (“peer effects”) is very limited so far. This study uses data from the German Socio-Economic Panel to analyze peer effects in risk taking by tracking the impact of the East-West migration on the willingness to take risks after the German reunification. We find strong empirical evidence for such peer effects. Interestingly, however, the hypothesis that these effects are stronger in more sociable communities is rejected.