Risk Attitudes, Sample Selection and Attrition in a Longitudinal Field Experiment

Longitudinal experiments allow one to compare inferences about behavior over time for the same individuals, and evaluate the temporal stability of latent preferences. But longitudinal experiments entail the possibility of sample selection and sample attrition over time, confounding inferences about temporal stability. We evaluate the hypothesis that risk preferences are stable over time using a remarkable data set combining administrative information from the Danish registry with longitudinal experimental data we designed to allow better identification of joint selection and attrition effects with respect to risk attitudes. Our design builds in explicit randomization on the incentives for participation. We show that there are significant sample selection effects on inferences about the extent of risk aversion, but that the effects of subsequent sample attrition are minimal. Ignoring sample selection leads to inferences that subjects in the population are more risk averse than they actually are. Correcting for sample selection and attrition affects utility curvature, but does not affect inferences about probability weighting. Properly accounting for sample selection and attrition effects leads to findings of temporal stability in overall risk aversion. However, that stability is around different levels of risk aversion than one might naively infer without the controls for sample selection and attrition we are able to implement. This evidence of “randomization bias” from sample selection is important given the popularity of field experiments that rely on randomization, and the effects that risk attitudes have for economic behavior in general.