The question of well-being if households are highly risk-averse

H ouseholds in the euro zone are highly risk-averse, as shown by the very high level of social welfare, labour market regulations and the structure of savings and wealth. One common desire is for euro-zone households to take more risk, for example change jobs more often, create more companies and hold more risky or long-term assets. The objective of more risk-taking by households is to promote the “Schumpeterian” or innovative side of the economy and the allocation of labour and capital to the most efficient projects, even though risky. But having households take more risk will reduce their well-being, as they are highly risk-averse. It must then be certain that the gain in well-being obtained by greater household risk-taking (increase in growth and innovation) will offset the loss of well-being due to greater risk-taking than desired by households.