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Secure Job And Risky Choices? An Analysis Of State And Wealth Dependence Of Risk Aversion Using Severance Pay Allocation

Author

Listed:
  • Patrizia Ordine
  • Giuseppe Rose

    (Dipartimento di Economia, Statistica e Finanza, Università della Calabria)

Abstract

State- and Wealth-dependence of individual risk preferences are investigated using Italian panel data. To elicit risk aversion, a social security policy reform occurred in Italy in 2008 is exploited. This law asks private sector employees to invest their accruing severance pay in three alternative pension funds strongly heterogeneous in terms of risk. The determinants of this choice are analyzed and the focus is posed on the effect of wealth and job-status. These are investigated considering i) the behavior of workers changing job contract; ii) the presence of different income prospects associated to labor contracts'?length; iii) the exogenous threshold provided by fi?rm size in terms of Employment Protection Legislation. Fixed-Effects estimates show that preferred funds - and consequently risk preferences - are not affected by wealth modi?cations pointing out for the presence of Constant Relative Risk Aversion. Conversely, job contract characteristics in terms of job protection from the risk of layoff appear to signifi?cantly affect risk attitude pointing for the existence of a State Dependent Constant Relative Risk Aversion.

Suggested Citation

  • Patrizia Ordine & Giuseppe Rose, 2014. "Secure Job And Risky Choices? An Analysis Of State And Wealth Dependence Of Risk Aversion Using Severance Pay Allocation," Working Papers 201407, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    • Handle: RePEc:clb:wpaper:201407
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    References listed on IDEAS

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    More about this item

    Keywords

    Relative Risk Aversion; Pension Funds; Panel Data; Job Movers;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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