Risk preferences and the decision to flee conflict

Working Paper 2018-460

Abstract

Despite the growing numbers of forcibly displaced persons worldwide, many people living under conflict choose not to flee. Individuals face two lotteries – staying or leaving- characterized by two distributions of potential outcomes. This paper proposes to model the choice between these two lotteries using quantile maximization as opposed to expected utility theory. We posit that risk-averse individuals aim at minimizing losses by choosing the lottery with the best outcome at the lower end of the distribution, whereas risk-tolerant individuals aim at maximizing gains by choosing the lottery with

Authors: Lidia Ceriani, Paolo Verme.