2017/08/21 by William A. V. Clark, William Lisowski · 93 citations
Economics, Econometrics and Finance · Social Sciences · #Actuarial science #Computer science #Economic growth #Economics #Endowment #Endowment effect #Expected utility hypothesis #Factor endowment #Financial economics #Housing Market and Economics #Loss aversion #Microeconomics #Political science #Prospect theory #Regional Economics and Spatial Analysis #Risk aversion (psychology) #Status quo #Status quo bias #Test (biology) #Urban, Neighborhood, and Segregation Studies #Value (mathematics)
paper · pdf · doi:10.1073/pnas.1708505114
published in Proceedings of the National Academy of Sciences 114(36), E7432-E7440 (National Academy of Sciences)
openalex publication_date 2017/08/21 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/26
Migration has always involved stress and risk. More risk-averse households are less likely to move, while less risk-averse households will seek out opportunities and migrate. We investigate how the theoretical contributions of prospect theory, and specifically the endowment effect, can provide new understanding about decisions whether to migrate or not. We test the hypothesis that risk aversion extends the length of stay in the dwelling and, by extension, in the local labor and housing markets. How long people remain in place is a function, we hypothesize, of their independently self-assessed propensity to take risks, after controlling for a range of demographic and socioeconomic characteristics. We use the theoretical insights of prospect theory and the endowment effect (the notion of the "use value" differing from the "exchange value") to explain the likelihood of staying after controlling for life-course events. The results confirm the explanatory power of self-assessed risk in the decision to migrate or stay and, equally important, confirm the role of the endowment effect.