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Education, Risk Preference and Wages

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Author Info
Sarah Brown () (Department of Economics, The University of Sheffield)
Karl Taylor () (Department of Economics, The University of Sheffield)

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Abstract

We explore the effect of risk preference on the educational attainment and wages of a sample of individuals drawn from the U.S. Panel Study of Income Dynamics (PSID). Using a sequence of questions from the 1996 PSID, we are able to construct measures of risk aversion and risk tolerance allowing us to explore the implications of interpersonal differences in risk preference for educational attainment. Our empirical findings suggest that risk preference has a significant influence on human capital accumulation, with the degree of risk aversion (tolerance) being inversely (positively) associated with educational attainment. In addition, our findings suggest that risk preference is a valid instrument for education in a standard Mincerian earnings function.

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File URL: http://www.shef.ac.uk/content/1/c6/05/25/19/SERP2006002.pdf
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File URL: http://www.shef.ac.uk/content/1/c6/05/25/19/SERP2006002.pdf
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Publisher Info
Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2006002.

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Length: 27 pages
Date of creation: Feb 2006
Date of revision: Feb 2006
Handle: RePEc:shf:wpaper:2006002

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Related research
Keywords: Human Capital; Risk Aversion; Risk Preference; Wages.;

Other versions of this item:

Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Belzil, Christian & Hansen, Jörgen, 2002. "Earnings Dispersion, Risk Aversion and Education," IZA Discussion Papers 513, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Luigi Guiso & Monica Paiella, 2005. "The Role Of Risk Aversion In Predicting Individual Behavior," Temi di discussione (Economic working papers) 546, Bank of Italy, Economic Research Department. [Downloadable!]
    Other versions:
  4. Shaw, Kathryn L, 1996. "An Empirical Analysis of Risk Aversion and Income Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 626-53, October. [Downloadable!] (restricted)
  5. Ignacio Palacios-Huerta, 2003. "An Empirical Analysis of the Risk Properties of Human Capital Returns," American Economic Review, American Economic Association, vol. 93(3), pages 948-964, June. [Downloadable!]
    Other versions:
  6. Kathryn Wilson & Barbara Wolfe & Robert Haveman, 2005. "The Role of Expectations in Adolescent Schooling Choices: Do Youths Respond to Economic Incentives?," Economic Inquiry, Oxford University Press, vol. 43(3), pages 467-492, July. [Downloadable!] (restricted)
  7. Sarah Brown & Karl Taylor, 2005. "Wage Growth, Human Capital And Financial Investment," Manchester School, University of Manchester, vol. 73(6), pages 686-708, December. [Downloadable!] (restricted)
  8. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-63, December. [Downloadable!] (restricted)
  9. Haliassos, Michael & Bertaut, Carol C, 1995. "Why Do So Few Hold Stocks?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1110-29, September. [Downloadable!] (restricted)
  10. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Blackwell Publishing, vol. 17(2), pages 115-156, 04. [Downloadable!] (restricted)
  11. Brunello, Giorgio, 2002. "Absolute risk aversion and the returns to education," Economics of Education Review, Elsevier, vol. 21(6), pages 635-640, December. [Downloadable!] (restricted)
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  12. Johnson, William R, 1978. "A Theory of Job Shopping," The Quarterly Journal of Economics, MIT Press, vol. 92(2), pages 261-78, May. [Downloadable!] (restricted)
  13. Brown, James N & Rosen, Harvey S, 1987. "Taxation, Wage Variation, and Job Choice," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 430-51, October. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lisa R. Anderson & Jennifer M. Mellor, 2007. "Predicting Health Behaviors with an Experimental Measure of Risk Preference," Working Papers 59, Department of Economics, College of William and Mary. [Downloadable!]
    Other versions:
  2. Lisa R. Anderson & Jennifer M. Mellor, 2008. "Are Risk Preferences Stable? Comparing an Experimental Measure with a Validated Survey-Based Measure," Working Papers 74, Department of Economics, College of William and Mary. [Downloadable!]
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