Essays on Household's Preferences and Subjective Evaluations

This thesis is a collection of three empirical essays on household’s preferences and subjective evaluations. The first chapter, titled “Social status and personality Traits” is a joint work with Alessandro Bucciol and Luca Zarri. This work is forthcoming in the Journal of Economic Psychology. In this work we provide direct evidence on the relationship between social status and personality traits. Using survey data from the 2006-2012 waves of the US Health and Retirement Study, we show that self-perceived social status is associated with all the “Big Five” personality traits, after controlling for observable characteristics that arguably reflect one’s actual status. We also construct an objective status measure that in turn is influenced by personality traits. Objectively measured status is positively but not highly correlated with its subjective counterpart and, when incorporated in a regression specification, still leaves room for direct effects of personality traits on status perception. The second chapter remains in the domain of behavioral economics, studying the interaction between financial risk preferences, generalized trust and financial portfolio decision. The title of the work is “Financial Risk Tolerance and Trust in Others: Substitutes or Complements for Risky Asset Holdings? ” Using two waves of the Survey on Health, Ageing and Retirement in Europe (SHARE, 2006-2013), this paper explores the role jointly played by individuals’ financial risk tolerance and their level of trust in other in affecting their decision to hold risky assets. I find a large variation in risk tolerance and trust across European countries and households. Moreover, I show that risky assets investments are more frequent and larger in households featuring either risk tolerance or (to a smaller extent) a combination of risk aversion and trust. Trust seems to act as an imperfect substitute for risk tolerance. These findings have relevant implications for the understanding of heterogeneity in household financial decisions as well as of the role that trust can play as a lubricant of the economic system. The third and last chapter of the thesis is again dedicated to the study households’ preferences. The title of this work is “Gender Differences in Risk and Time Preferences: The Role of Marital Status”. Using Dutch survey data from 1996 to 2013, this paper investigates the differences in time and risk preferences along the gender and marital status dimensions. In order to do so, I take into consideration both a self-reported measure and a structural estimation of the preference parameters. Results from standard regressions suggest that women are indeed more risk averse than men. However, there is also a significant interaction effect of gender and marital status: single men are less risk averse than married ones, while for women the difference isn’t significant. Results for the time preference estimation are less conclusive. Structural estimation of risk aversion parameters generally confirms the regression analysis’ results. Moreover, these estimations suggest an even stronger interaction between gender and marital status. As for time preferences, men seem to be more patient and have longer time horizon than women, but the results may be driven by the correlation with the risk attitude.