Risk Preferences of People With Disabilities and Their Relation to Labor Market Participation

Abstract

Previous studies have suggested that the participation of people with disabilities in the labor market might be affected by their risk perception, as finding a job might be perceived as an action that risks their allowance. The current study explores 2 main questions that relate to risk preferences among people with disabilities. First, it explores the potential relationship between risk preferences and employment by comparing the risk preferences of employed and unemployed people with disabilities. Second, it questions whether the risk preferences of people with disabilities are different from those of people without disabilities. To measure risk preferences in these 3 populations, we used 2 common elicitation methods: the Holt–Laury task and the balloon analogue risk task. The 2 methods complement each other, as the Holt–Laury task measures decisions from description and “explicit” risk-taking, whereas the balloon analogue risk task measures decisions from experience and “implicit” risk-taking. The results revealed no difference in risk preferences between people with and without disabilities. However, contrary to propositions from earlier studies, employed people with disabilities were found to be more risk-averse than unemployed people with disabilities. One possible interpretation of the results could be that risk aversion increases the willingness of people with disabilities to make compromises in order to participate in the labor market.