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The relative risk aversion hypothesis of educational choice

Author

Listed:
  • Eskil Heinesen

    (AKF, Institute of Local Government Studies, Nyropsgade 37, DK-1602 Copenhagen V, Denmark)

  • Richard Davies

    (Centre for Applied Statistics, Lancaster University, Lancaster, LA1 4YW, UK)

  • Anders Holm

    (Department of Sociology, University of Copenhagen, Linnésgade 22, DK-1361 Copenhagen K, Denmark)

Abstract

Analysing young people's educational choices, we derive and test implications of a relative risk aversion hypothesis: that educational choices are made so as to minimize the risk of ending up with a lower level of education than one's parents. These implications are in general different from what one would expect from human capital theory. We use a unique data set which combines data from administrative registers on young people's pathways through the educational system and their family background with survey data on their academic abilities at lower secondary school. The evidence is partly in favour of the relative risk aversion hypothesis.

Suggested Citation

  • Eskil Heinesen & Richard Davies & Anders Holm, 2002. "The relative risk aversion hypothesis of educational choice," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(4), pages 683-713.
    • Handle: RePEc:spr:jopoec:v:15:y:2002:i:4:p:683-713
    Note: Received: 19 August 1999/Accepted: 10 January 2001
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    Citations

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    Cited by:

    1. Stocké, Volker, 2007. "The motive for status maintenance and inequality in educational decisions : which of the parents defines the reference point?," Papers 07-20, Sonderforschungsbreich 504.
    2. Katja Seidel, 2021. "The transition from School to Post-Secondary Education – What factors affect educational decisions?," Working Paper Series in Economics 398, University of Lüneburg, Institute of Economics.
    3. Martina Jakob & Benita Combet, 2020. "Educational aspirations and decision-making in a context of poverty. A test of rational choice models in El Salvador," University of Bern Social Sciences Working Papers 33, University of Bern, Department of Social Sciences, revised 01 Aug 2020.
    4. James McIntosh & Martin Munk, 2007. "Scholastic ability vs family background in educational success: evidence from Danish sample survey data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(1), pages 101-120, February.
    5. Daniil Alexandrov & Ksenia Tenisheva & Svetlana Savelyeva, 2015. "No-Risk Mobility: Through College to University," Voprosy obrazovaniya / Educational Studies Moscow, National Research University Higher School of Economics, issue 3, pages 66-91.
    6. Stocké, Volker, 2008. "Educational decisions as rational choice? : an empirical test of the Erikson-Jonsson model for explaining educational attainment," Papers 08-03, Sonderforschungsbreich 504.
    7. Mads M. Jæger & Anders Holm, 2012. "Conformists or rebels? Relative risk aversion, educational decisions and social class reproduction," Rationality and Society, , vol. 24(2), pages 221-253, May.
    8. Carlo Barone & Katherin Barg & Mathieu Ichou, 2021. "Relative risk aversion models: How plausible are their assumptions?," Rationality and Society, , vol. 33(2), pages 143-175, May.
    9. Lu Li & Andreas Richter & Petra Steinorth, 2023. "Mental health changes and the willingness to take risks," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 48(1), pages 31-62, March.
    10. Daniel Alexandrov & Ksenia Tenisheva & Svetlana Savelyeva, 2015. "Safe Mobility: University after Technical College Pathway," HSE Working papers WP BRP 27/EDU/2015, National Research University Higher School of Economics.
    11. Samuel R. Lucas, 2009. "Stratification Theory, Socioeconomic Background, and Educational Attainment," Rationality and Society, , vol. 21(4), pages 459-511, November.
    12. Mads Meier Jæger, 2007. "Economic and Social Returns To Educational Choices," Rationality and Society, , vol. 19(4), pages 451-483, November.
    13. Gianluca Manzo, 2006. "“Generative Mechanisms and Multivariate Statistical Analysis: Modeling Educational Opportunity Inequality with a Multi-Matrix Log-Linear Topological Model: Contributions and Limitations”," Quality & Quantity: International Journal of Methodology, Springer, vol. 40(5), pages 721-758, October.
    14. Tamás Keller & Guido Neidhöfer, 2014. "Who Dares, Wins?: A Sibling Analysis of Tertiary Education Transition in Germany," SOEPpapers on Multidisciplinary Panel Data Research 713, DIW Berlin, The German Socio-Economic Panel (SOEP).
    15. Robert Erikson & John H. Goldthorpe, 2002. "Intergenerational Inequality: A Sociological Perspective," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 31-44, Summer.
    16. Anders Holm & Mads Meier Jæger, 2005. "Relative Risk Aversion and Social Reproduction in Intergenerational Educational Attainment: Application of a Dynamic Discrete Choice Mode," CAM Working Papers 2006-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    17. Daniela Bellani & Luis Ortiz-Gervasi, 2022. "Parental time preferences and educational choices: The role of children’s gender and of social origin," Rationality and Society, , vol. 34(1), pages 96-125, February.
    18. Kim, Young-Il & Lee, Jungmin, 2014. "The long-run impact of a traumatic experience on risk aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 174-186.
    19. J. François Outreville, 2015. "The Relationship Between Relative Risk Aversion And The Level Of Education: A Survey And Implications For The Demand For Life Insurance," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 97-111, February.
    20. Jakob, Martina & Combet, Benita, 2020. "Educational aspirations and decision-making in a context of poverty. A test of rational choice models in El Salvador," SocArXiv w9bkq, Center for Open Science.
    21. Stocké, Volker, 2006. "Explaining secondary effects of families' social class position : an empirical test of the Breen-Goldthorpe model of educational attainment," Papers 06-07, Sonderforschungsbreich 504.

    More about this item

    Keywords

    Educational choice; human capital; intergenerational mobility;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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