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Traditional Trust Measurement and the Risk Confound: An Experiment in Rural Paraguay Laura Schechter 1 University of California, Berkeley Abstract Play in the traditional trust experiment depends both on trust beliefs and on levels of risk aversion. We ran two experiments with a diverse set of subjects in fifteen villages of rural Paraguay, the traditional trust experiment and a new experiment measuring only risk aversion. We find that risk attitudes are highly predictive of play in the trust game. In addition, omitting risk aversion as a regressor in trust regressions significantly changes the coefficients of important explanatory variables such as gender and wealth. Key words: Trust, Risk Aversion, Experiment, Paraguay, Gender JEL classification: C93, D81 This research has received funding from the Social Science Research Council (SSRC) Program in Applied Economics, the Russell Sage Foundation (RSF) Small Grants in Behavioral Economics, Berkeley Institute of Business and Economic Re- search (IBER), Berkeley Center for International and Development Economics Re- search (CIDER), and the Giannini Foundation. Nava Ashraf, Colin Camerer, Jeff Carpenter, Herb Gintis, E. Lance Howe, Dean Karlan, Margaret Levi, Richard McElreath, Perry Shapiro, participants at the NEUDC 2003 conference, an anony- mous referee and the co-editor gave excellent comments. I am grateful to Jos´e Moli- nas and everyone at Instituto Desarrollo for their support while in Paraguay, and I am indebted to Ethan Ligon and Matthew Rabin for their invaluable advice and their patience. Email address: schechte@are.berkeley.edu (Laura Schechter). 1 Department of Agricultural and Resource Economics, 207 Giannini Hall #3310, University of California, Berkeley CA 94720-3310, T