Munich Risk and Insurance Center

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Project 3: Physical and Mental Health, Health Shocks and the Willingness to Take Risk

Contact: Lu Li, Petra Steinorth, Andreas Richter

We analyze the impact of mental and physical health on the willingness to take risk (WTR) of individuals utilizing the nationally representative, longitudinal SOEP dataset of the German population. We distinguish between mental health and physical health measured by the SF-12 component summary scores. We find that physical and mental health levels are both significantly positively associated with WTR but the impact of mental health is almost twice as big. In addition, we find that negative shocks to mental health are associated with lower WTR while physical health shocks are not associated with changes in the WTR.