Status, Control Beliefs, and Risk-Taking

We show that relative standing in the wealth distribution shapes individuals’ willingness to take risks. Using a large-scale representative survey, we manipulated respondents’ perceived relative standing by randomly varying the range of response categories when asking about their wealth level. Respondents who are induced to perceive their relative wealth as low display more tolerance towards risk in a subsequent incentivized lottery task. This effect is mainly driven by individuals who more firmly believe that life outcomes are beyond their control. This heterogeneity in individual-specific beliefs highlights the benefits of incorporating personality constructs into economic analysis.