Essays on Risk Avoidance Behaviors

Abstract

This dissertation is a collection of essays on individual’s risk avoidance behaviors. Risk avoidance behavior is a key topic in behavioral economics, and it is also a significant impactor of market dynamics. Chapter 1 investigates the labor participation activity in the Chicago taxi industry to provide a new method for estimating the wage-risk tradeoff. I propose a cross-period specification to estimate the value of a statistical life (VSL) in a solo industry setup. I find that taxi drivers in Chicago city exhibit lower risk premium than that in other cross-sectional analysis, however, the hazard compensation to keep their workload is similar to some regulated COVID-19 hazard pay in other industry. I also find evidence supporting that taxi drivers make their work decisions across the days while most existing literature is focused on the in-day decision making process. It also compliments existing literature on COVID-19 related hazard pay with quantitative analysis. Chapter 2 studies the impacts brought by the extensive rise of carjacking cases to the ridesharing service in Chicago. I use a first-differenced model and spatial analysis to unveil the change in labor supply of ridesharing services in response to the rising risk from carjacking crimes. Evidence suggests that ridesharing drivers strategically avoid areas with higher carjacking crime risks, and this risk avoidance behavior is sensitive to hours in the day and holidays. Chapter 3 explore the indirect economic impacts generated by the prolonged 2015 harmful algal bloom event in California, U.S.A. During this event, harmful algae produced high levels of domoic acid (a neurotoxin) resulting in fishery closures for all commercial Dungeness crab fisheries in California lasting roughly 4.5 months. To estimate the impacts of the event, we investigate whether Dungeness crab prices, both at the ex-vessel and consumer levels, were negatively impacted by the event after the closures were lifted and the crab was declared safe to eat. We find ex-vessel prices fell by at least 9.6% but consumer prices were not impacted. We put forth three competing theories to explain these outcomes and discuss the efficiency and distributional implications of each alternative.