Violence, Psychological Trauma, and Risk Attitudes: Evidence from Victims of Violence in Colombia

Traumatic experiences can alter individuals' behavior and deplete their abiliTY to make economic decisions. In this article, I analyze the effects of violence on risk attitudes. For this purpose, I sampled a group of victims of violence in Colombia and collected data on the severiTY and temporal proximiTY of their exposure to violence and on their symptoms of psychological trauma. I find that more severe violence brings about higher levels of risk aversion in the gains and ambiguiTY domains but that the behavioral effect is not permanent. I also find that the effect is driven by severe anxieTY disorders, which is consistent with studies in psychology. The results suggest that violence can affect poverTY dynamics through a behavioral channel.

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