Risk and Refugee Migration

This paper uses the experimental setup of Tanaka et al. (2010) to measure refugees’
risk preferences. A sample of 218 asylum seekers was interviewed in 2017-18
in Luxembourg. Contrary to studies which focus on risk aversion in general, we
analyze its components using a cumulative prospect theory (CPT) framework. We
show that refugees exhibit particularly low levels of risk aversion compared to
other populations and that CPT provides a better fit for modeling risk attitudes.
Moreover, we include randomized temporary treatments provoking emotions and
find a small significant impact on probability distortion. Robustness of the Tanaka
et al. (2010) experimental framework is confirmed by including treatments regarding
the embedding effect. Finally, we propose a theoretical model of refugee
migration that integrates the insights from our experimental outcomes regarding
the functional form of refugees’ decision under risk and the estimated parameter
values. The model is then simulated using the data from our study.