Who doesn’t take a risk, never gets to drink champagne: women, risk and economics
Who doesn’t take a risk, never gets to drink champagne: women, risk and economics

Summary/Abstract: Because differences in risk attitudes are often quoted as one of the causes of lower earnings of women and their absence in senior positions, understanding whether risk aversion is an intrinsic, biological feature or is linked with some socio-cultural and contextual factors is of great importance for policy and education. This paper provides an overview of studies, mainly experimental, on risk aversion of women and men. First, it discusses results indicating greater risk aversion among women and linking it with biological characteristics. Then it lists studies refuting these differences or pointing to sources other than biological. The entire discussion will be framed in the context of Identity Economics (IE) suggesting that women’s risk preferences may be linked with identity and thus also with normative requirements placed on them. The main aim of the study is to examine whether commonly accepted claims are not persistent stereotypes and whether differences arise out of social, cultural or contextual rather biological causes. It presents arguments supporting the hypothesis that women are a varied group and their risk attitudes are sensitive to even slight contextual alterations. According to the OECD, women on average earn less (e.g. in Slovakia 13.9%, 2017), are under-represented in boards (OECD average 20%, Slovakia 14%), spend twice as much time as men on unpaid household work (OECD average 271:137 min.), and in most countries there is less than 30% representation of women in parliaments (Slovakia 19%, 2014), although according to the World Bank they account for 49.5% of the global population. These are only a few selected examples of imbalances important from the perspective of both social and economic life. The answer to the question about the sources of these inequalities is a starting point for action that should provide both genders with equal chances. The main subject of the paper is risk aversion – one of the most important factors believed to differentiate women from men and affecting their incomes, social status and generally professional success. The main aim of the study is to demonstrate that risk aversion is not absolute and immune to manipulations. According to lexical definitions, risk is “a situation involving exposure to danger, a possibility that something unpleasant will happen” (Oxford Dictionaries) or “a possibility of loss or injury” (Merriam Webster). Economics defines risk aversion in narrower terms, as a feature of a person who presented with two options with the same expected utility chooses the certain or more probable one. Although economic men should be indifferent to risk, actual people of both sexes, are rather risk averse. The definition of risk, however, affects choices of measures. Most commonly used are hypothetical or real-stake lotteries (Holt, Laury 2002), less frequently questionnaires covering issues such as smoking, extreme sports, driving (Weber et al. 2002) and only occasionally field studies analysing actual risky behaviour (such as behaviour in bridge tournaments – Dreber, von Essen, Ranehill 2011; betting in dog and horse racing – Johnson, Powell 1994). The paper shows that women are a much more diverse group than many papers claim and risk attitudes are sensitive to slight modifications, including used measures, and is strongly affected by social and cultural factors. Causes of gender differences range from biological (testosterone level, finger ratio), through socialisation, motivation and preferences, to situational factors such as the context of the study or used tools. The background of this overview is provided by Identity Economics (Akerlof, Kranton 2000; 2010) according to which identity as well as social roles and stereotypes are crucial for choices, because violating social prescriptions lead to anxiety, discomfort and ostracism, particularly when an activity (in this case risk taking) is stereotyped as a male domain. Their theory suggests that utility of a given behaviour increases when it is consistent with social prescriptions applicable to a person and decreases when behaviour violates social norms and runs counter to social stereotypes and expectations. The history of economic studies on risk-aversion dates back to the 1950s and covers many issues including lotteries (e.g. Allais’ paradox or an older Petersburg paradox), investment experiments (e.g. Charness, Gneezy 2012) or even analysis of the “capitalistic structure of economy” (Arrow 1951: 404). Because risk is present in nearly every decision, not only economic, a possible greater risk aversion of women would adversely affect many important areas, such as investing in stocks, education, health, possession of real estate and finally choices related to employment or starting a business (Dohmen et al. 2012; Barsky et al. 1997; Guiso, Paiella 2008; Bonin et al. 2007; Dohmen et al. 2011; Schlaegel, Koenig 2014). Additionally, because it is assumed that lower risk aversion is a desirable feature, particularly among managers, women can fall victim to negative selection or even statistical discrimination. Of course women and men are not identical, but because many of the differences important from the perspective of economics or labour market gradually disappear – particularly in countries with greater equality – we can safely assume that their sources should not be (or at least not completely) sought in biology. And since we have observed many significant changes in areas such as mathematic, intelligence or education, it seems likely that these trends will continue. Furthermore, following Hyde (2005) or Nelson (2012; 2013; 2018) examining differences between both groups, we will likely find similarities rather than unbridgeable gaps. Additionally, unobservable characteristics such as masculinity score or testosterone level prove to be better predictors of risky behaviour than sex. Finally, as we have seen there is even no universal measure of risk aversion providing consistent results across all contexts. Therefore, using biological sex as a forecast of competence in dealing with risk, as well as in many other cases, is, at best, inefficient. Believing that risk is a guarantee of success, that women are conservative when it comes to taking risk and that taking risk is a male domain, places women in an unfair situation, where whatever they do, they will lose – they will face either statistical discrimination or ostracism. Therefore, if the evidence is mixed, it is always better to judge people of both sexes based on their actual competences not on assumptions, prejudices, or stereotypes we have about them because of their affiliation to a certain group. And above all, not to demand more because we expect a woman to behave according to prescriptions that are irrelevant when hiring a man.

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