Estimating Risk

Abstract

This paper considers the process by which individuals estimate the risk of adverse events, with particular attention to the social context in which risk estimates are formed. We compare subjective probability estimates of crime victimization to actual victimization experiences among respondents from the 1994 to 2002 waves of the Survey of Economic Expectations ( Dominitz and Manski 2002 ). Using zip code identifiers, we then match these survey data to local area characteristics from the census. The results show that: (1) the risk of criminal victimization is significantly overestimated relative to actual rates of victimization or other negative events; (2) neighborhood racial composition is strongly associated with perceived risk of victimization, whereas actual victimization risk is driven by nonracial neighborhood characteristics; and (3) white respondents appear more strongly affected by racial composition than nonwhites in forming their estimates of risk. We argue these results support a model of stereotype amplification in the formation of risk estimates. Implications for persistent racial inequality are considered.