Parenthood leads to considerable changes in individual risk attitudes over time; risk aversion increase as early as two years before becoming a parent; effects disappear when the child becomes older

Parenthood, risk attitudes and risky behavior. Katja Görlitz, Marcus Tamm. Journal of Economic Psychology, July 11 2019, 102189. https://doi.org/10.1016/j.joep.2019.102189

Highlights
•    Parenthood leads to considerable changes in individual risk attitudes over time.
•    Risk aversion increase as early as two years before becoming a parent.
•    Effects disappear when the child becomes older.
•    Risky labor market behavior remains unaffected by parenthood.

Abstract: This study analyzes how risk attitudes change when individuals experience the major life event of becoming a parent by using longitudinal data for a large and representative sample of individuals from Germany. The analysis uses a survey-based measure of risk aversion. The estimation is based on an individual fixed effects model similar to an event study. On average, men and women experience a considerable increase in risk aversion around the time of first childbirth. This increase already starts as early as two years before they become parents, it is largest shortly after childbirth and it disappears when the child becomes older. When analyzing risky choices, the results indicate that risky labor market behavior remains unaffected by parenthood.