Predictions for Explaining the Depression-Gaps in Risk-Taking Behaviors
| Financial Risk-Taking | Health Risk-Taking | Social Risk-Taking | ||||
|---|---|---|---|---|---|---|
| Risky Assets | No Insurance | Smoker | Poor Diet / Sedentary | Lend Belongings | Lend Money | |
| Panel A: Observed Behavior | ||||||
| Depressed take … risk | Less | More | More | More | Less | More |
| Panel B: Hypothesized Behavior | ||||||
| Budget constraints and discounting | ||||||
| Lower income/wealth | Less due to less wealth to invest and DARAa in wealth | Less due to DARA in wealth | Less due to cigarette costs | More due to healthier options more expensive | Less due to less capacity to lend | Less due to less capacity to lend |
| Lower time horizon | Less due to undervaluing future return. | More due to “nothing to lose” | More due to “nothing to lose” | Less due to undervaluing future returns | Less due to undervaluing future returns | |
| Lower patience | Less due to discounting future returns | More due to discounting future costs | More due to discounting future costs | Less due to discounting future rewards | Less due to discounting future rewards | |
| Time-inconsistent preferences | ||||||
| Lower self-control | More due to overweighing present | Less due to overweighing present | Less due to overweighing present | |||
| Less internal locus of control | ||||||
| Higher impulsivity | ||||||
| Lower conscientiousness | ||||||
| Cognitive limitations | Less due to avoidance of complicated tasks | |||||
| Emotions and expectations | ||||||
| Lower emotional stability | More due to stronger emotional drive | ? | ? | |||
| Lower optimism | Less due to underestimation of future return. | Less due to higher perceived need for insurance | Less due to overvaluing future costs | Less due to lower perceived future benefits | Less due to lower perceived future benefits | |
| Lower prediction accuracy | ? | ? | ? | ? | ||
| Lower trust | Less | Less | ||||
Notes: Panel 1 reports the observed depression-gap in risk-taking behaviors from the results presented in Tables 4, 5, and 6. Panel 2 presents our hypothesis of how each factor (mediator) in Column 1 may affect each risk-taking behavior. Mediators that are expected to close the observed depression-gap in risk-taking behavior when controlling for them in regressions are italicized, while factors that are expected to widen the gap are bold.
↵aDecreasing absolute risk aversion.