Birth order affects risk taking.
Economists' study of the relationship between birth order and the willingness to take economic risks might help managers to choose the right people for making economic decisions.
In late September 2009, the University of South Carolina released the findings of a study economists conducted to find out whether birth order determines someone's willingness to make risky economic decisions. The economists think so and claim to have data to prove it.
An experimental economist at the Darla Moore School of Business at the University of South Carolina and a recently graduated doctoral student think so, and they have the data from their National Science Foundation (NSF) study to prove it. Dr. Melayne McInnes, an associate professor in economics, and her student, Erica Morgan, found that first born siblings tend to be more risk averse and patient in making monetary decisions. Conversely, last born siblings tend to take bigger risks and are willing to gamble for a higher payoff but are less willing to wait unless the rate of return is much higher.
"In the large scheme of things, economists want to understand decisions to save money or to invest in an education or a risky venture," McInnes said, "and these decisions are driven by risk tolerance and patience. Sometimes, we want to control for risk attitudes in our calculations, so having a rough screen can be helpful."
To test the hypothesis, McInnes and Morgan devised different scenarios that offered participants the possibility of larger payoffs with higher risk, smaller payoffs with lower risk, larger payoffs with a longer time delay, and smaller payoffs with a shorter time delay. The kicker? They used real money provided through an NSF grant.
"You have to use real currency in experiments like this," said Morgan, who earned her doctorate in August and is a...
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