Scarred by Nature: How Early Exposure to Natural Disasters Shapes Risk Attitudes

Can early-life experiences shape long-term risk attitudes? This paper examines the lasting effect of exposure to natural disasters during early adulthood on individual risk preferences. Using harmonized survey data linked to disaster records, we find that individuals exposed to natural disasters between the ages of 18 and 25 exhibit significantly greater risk aversion later in life. This effect is robust across a range of alternative specifications. We further explore the role of cultural transmission as a mechanism, showing that social connectedness moderates the observed behavioral shift. Our findings underscore the impressionable years as a critical window for the formation of individual preferences. The study offers new insights into how climate-related shocks can exert long-lasting behavioral effects, with implications for public policy, economic behavior, and climate adaptation.