资源环境科技发展态势分析平台

We argue that urbanization reshapes an individual’s risk preference by exerting self-selection and assimilation effects. Taking advantage of the unique hukou system in the People’s Republic of China, we initiate a quasi-experiment method to elicit the two effects, using 2013 data from the Chinese General Social Survey. We find strong evidence supporting our two-effect theory and the magnitude of both effects are sizable and near in scale. Overall, urbanization improves migrants’ risk appetite, and mediated by this improvement, migrants are more likely to get engaged in uncertain economic activities than their rural peers, as indicated by the evidence when applying the two-effect theory to investigate how households decide on risky financial asset investment.

WORKING PAPER NO: 710