‘Risk drain’: rural Norway loses enterprising people because younger, educated risk-takers move to cities
By Philip Toney
Innovation and local growth depend on people who are willing to take chances, yet new research on Norway suggests that these risk-takers are disproportionately drawn to the capital and larger cities. Using survey data on risk preferences, Philip Toney finds that individuals living in urban areas are less risk-averse than rural residents, but that this pattern is driven by demographics rather than place itself. Younger and more educated people are increasingly concentrated in Oslo and other cities, producing a “risk drain” alongside the familiar “brain drain”, which may make it harder for rural communities to spark entrepreneurship and adapt to economic change, pointing to the need for policies that help younger, educated residents build futures outside the capital.
Innovation and entrepreneurship depend on people who are willing to take risks. From starting a business to investing in new technology, risk-taking is an important ingredient for economic growth within a region. But what happens when some regions have fewer risk-takers than others? In Norway, as in many countries, policymakers have long sought to promote development outside the capital and other large cities. My research shows that this task may be harder than it seems—not just because of jobs and infrastructure, but because of the risk preferences those who live in rural areas.
Risk-taking is not evenly distributed across populations. Some people are more cautious, while others are more willing to deal with uncertainty. These individual differences, known as risk preferences, may matter for regional development. Regions with a greater share of risk-takers may have higher rates of entrepreneurship, innovation and investment. If rural residents are, on average, more risk-averse than their urban counterparts, this could slow down local growth and make rural development policies less effective.
To investigate whether such a divide exists, I analysed data from a representative survey of 904 Norwegians aged 18–64, collected by the research institute YouGov. The survey included a series of hypothetical income lotteries, based on the well-known method developed by Barsky et al Respondents were asked to choose between safer or riskier income options. Their choices were used to classify them into six categories of risk aversion, from risk-neutral to very risk-averse.
I then examined whether risk aversion varied systematically across four settlement types:
- Rural areas and small towns (fewer than 5,000 residents)
- Medium-sized towns (5,000–49,999 residents)
- Larger cities (50,000–270,000 residents)
- The capital region (Oslo and surrounding municipalities)
Finally, I tested whether any observed differences were due to the context of living in a city or countryside, or to composition, meaning that the people who live in cities differ from those who live in rural areas in terms of age, education, and other characteristics that are associated with different risk preferences. To separate these effects, I used a mediation analysis and examined how age and education may explain the urban–rural pattern.
The results show a clear and statistically significant pattern: people living in more urban areas are less risk-averse than those in rural areas. However, when age and education are taken into account, this difference disappears. In other words, it is not the urban environment itself that makes people less risk-averse, it is the kind of people who live there. Urban populations are, on average, younger and more educated, and much research has shown that these traits are associated with lower risk aversion.
Once these demographic factors are controlled for, the urban–rural difference in risk preferences is strongly reduced. This indicates that Norway is experiencing a “risk drain” alongside the more familiar “brain drain.” Younger, more educated, and less risk-averse individuals tend to concentrate in bigger cities, while rural areas are left with an older, less educated, and more cautious population. Interestingly, while the overall pattern of a “risk drain” holds, the effect is driven mainly by low risk aversion in Norway’s capital region: the Oslo area.
The findings have implications for regional development policy. Economic growth and innovation relies on both external support or subsidies, as well as the attitudes and motivations of the local population. If risk-takers are concentrated in cities, rural regions may find it harder to foster new ventures. Policies that may address this problem include enhanced education opportunities in rural areas and political measures that help younger people thrive in rural areas.
The paper also addresses that migration patterns are not just about jobs or lifestyle. They are part of a deeper sorting process: people differ in how much risk they are willing to take, and those differences shape where they live and what kinds of opportunities they pursue. Research from other countries has shown that less risk-averse individuals are more likely to migrate, particularly from rural to urban areas. Studies from Germany and China have documented that movers tend to be more willing to take risks. My study does not address the migration decision itself, but maps the current distributed nature of risk preferences in a Nordic context, where welfare systems reduce background economic risks and where differences between regions are smaller than in many other countries.
The takeaway is not that rural people are inherently more cautious, but that demographic composition matters. Rural Norway has older populations with lower education levels, both of which are linked to higher risk aversion. Over time, this may create a negative feedback loop: as more risk-tolerant people move to cities, rural areas may become less dynamic, reinforcing existing economic disparities. For policymakers, this means that efforts to strengthen rural regions should consider how to attract and retain younger, educated residents and entrepreneurs. Enhancing educational opportunities, improving access to finance for start-ups, and supporting local innovation hubs could help offset the imbalance.
The study offers a simple message: who takes risks, and where they live, matters for regional development. Norway’s capital area is not just a center of knowledge and jobs; it is also home to the country’s most risk-tolerant individuals. Meanwhile, rural regions face the challenge of maintaining economic vitality with a smaller pool of potential innovators and entrepreneurs. Recognizing this “risk drain” alongside the “brain drain” can help policymakers design more realistic and effective strategies to sustain vibrant communities across the whole country.
Author: Philip Toney is a Lecturer/Assistant Professor at HVL Business School in Sogndal and a PhD candidate at the University of Stavanger Business School. He studies risk preferences and debt behavior in the context of behavioral and financial economics.
This blogpost is a summary of this paper. It represents the views of the author, and not those of Regional and Federal Studies, the Centre on Constitutional Change, or the University of Edinburgh. It is published under a CC-BY-4.0 license.