The role of gene–environment interaction in the formation of risk attitudes

Abstract

Understanding the formation of risk preferences is crucial for elucidating the roots of economic, social, and health inequalities. However, this area remains inadequately explored. This study employs a risk preference measure directly linked to the labor market to examine whether previous experiences with high unemployment rates influence current risk decision-making among the elderly, and whether this impact varies by genotype. The findings indicate that individuals with low genetic predispositions for risk tolerance are more significantly influenced by historical fluctuations in unemployment rates than those with high genetic predispositions for risk tolerance. Consequently, this paper identifies genetic endowment as a crucial moderating factor that shapes how past experiences impact current decision-making processes. This disparity in how past experiences shape risk preferences based on genetic predisposition may further amplify inequalities in health, wealth, income, and other outcomes associated with risk preferences.