New Study Focuses on Risk Aversion to Understand Why Some People Flee Conflict, While Others Don’t
Americas, Disaster, News, August 26 2018
WASHINGTON, DC: Despite growing numbers of people that are forcibly displaced due to conflict, the reality is that many do not flee and continue to live under difficult circumstances. To understand how people make this choice, a new World Bank working paper, “Risk Preferences and the Decision to Flee Conflict,” examines the role of risk aversion and concludes that the risk-averse are the ones who prefer to flee, while the risk-tolerant stay in their own countries.
If confirmed more broadly, these findings contrast sharply with economic migrants, who are known to be risk takers seeking economic opportunities, underscoring the need to distinguish between these two groups with an appropriate policy response for each.
According to the paper, people living under conflict are faced with two choices or lotteries – staying or leaving – characterized by two distributions of potential outcomes. Using a Quantile Maximization (QM) model and risk aversion, it posits that risk-averse individuals aim to minimize losses by choosing the lottery with the best outcome at the lower end of the distribution, whereas risk-tolerant individuals aim to maximize gains by choosing the lottery with the best outcome at the higher end of the distribution.
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Source: World Bank
Re-posted with permission