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Compensating Wage Differentials for Schooling Risk in Denmark

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Author Info
Luis Diaz-Serrano
Joop Hartog
Helena Skyt Nielsen

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Abstract

In this paper we analyse the association between wage differentials and risk using detailed information on length and type of education as seen in Danish administrative registers. Our contribution to the literature is that we distinguish between transitory (time-series) and permanent (cross-sectional) income shocks, and estimate the compensation for both sorts of risk. We find that wage risk in a given education cell is associated with higher wages, while skewness is associated with lower wages. As a robustness check, we see that ad hoc risk measures based on earnings-mobility indicators confirm these findings. Copyright © The editors of the "Scandinavian Journal of Economics" 2008 .

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9442.2008.00558.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Scandinavian Journal of Economics.

Volume (Year): 110 (2008)
Issue (Month): 4 (December)
Pages: 711-731
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Handle: RePEc:bla:scandj:v:110:y:2008:i:4:p:711-731

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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. Telhado Pereira, Pedro & Silva Martins, Pedro, 2002. "Is there a return-risk link in education?," Economics Letters, Elsevier, vol. 75(1), pages 31-37, March. [Downloadable!] (restricted)
    Other versions:
  3. Hartog, Joop & Vijverberg, Wim P. M., 2002. "Do Wages Really Compensate for Risk Aversion and Skewness Affection?," IZA Discussion Papers 426, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Joop Hartog & Erik Plug & Luis Diaz Serrano & Jose Vieira, 2003. "Risk compensation in wages – a replication," Empirical Economics, Springer, vol. 28(3), pages 639-647, July. [Downloadable!] (restricted)
  5. Olson, Lawrence & White, Halbert & Shefrin, H M, 1979. "Optimal Investment in Schooling when Incomes are Risky," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 522-39, June. [Downloadable!] (restricted)
  6. Williams, Joseph T, 1979. "Uncertainty and the Accumulation of Human Capital over the Life Cycle," Journal of Business, University of Chicago Press, vol. 52(4), pages 521-48, October. [Downloadable!] (restricted)
  7. McGoldrick, Kimmarie & Robst, John, 1996. "The Effect of Worker Mobility on Compensating Wages for Earnings Risk," Applied Economics, Taylor and Francis Journals, vol. 28(2), pages 221-32, February. [Downloadable!] (restricted)
  8. Christiansen, Charlotte & Nielsen, Helena Skyt, 2003. "The Educational Asset Market: A Finance Perspective on Human Capital Investment," Finance Working Papers 02-9, University of Aarhus, Aarhus School of Business, Department of Business Studies. [Downloadable!]
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  9. Weiss, Yoram, 1972. "The Risk Element in Occupational and Educational Choices," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1203-13, Nov.-Dec.. [Downloadable!] (restricted)
  10. Hogan, Vincent & Ian Walker, 2002. "Education Choice under Uncertainty," Royal Economic Society Annual Conference 2002 103, Royal Economic Society. [Downloadable!]
  11. Eaton, Jonathan & Rosen, Harvey S, 1980. "Taxation, Human Capital, and Uncertainty," American Economic Review, American Economic Association, vol. 70(4), pages 705-15, September. [Downloadable!] (restricted)
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  12. Hartog, Joop & Serrano, Luis Diaz, 2002. "Earnings Risk and Demand for Higher Education: A Cross-Section Test for Spain," IZA Discussion Papers 641, Institute for the Study of Labor (IZA). [Downloadable!]
  13. 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)
  14. Javier Alvarez & Martin Browning & Mette Ejrnæs, 2002. "Modelling income processes with lots of heterogeneity," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D2-3, International Conferences on Panel Data. [Downloadable!]
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  15. Harmon, Colm & Hogan, Vincent & Walker, Ian, 2003. "Dispersion in the economic return to schooling," Labour Economics, Elsevier, vol. 10(2), pages 205-214, April. [Downloadable!] (restricted)
    Other versions:
  16. Kodde, David A, 1986. "Uncertainty and the Demand for Education," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 460-67, August. [Downloadable!] (restricted)
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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. Luis Diaz-Serrano & J. Hartog, 2004. "Is there a Risk-Return Trade-off across Occupations? Evidence from Spain," Economics, Finance and Accounting Department Working Paper Series n1441004, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  2. Jürg Schweri & Stefan C. Wolter & Joop Hartog, 2008. "Do Students Expect Compensation for Wage Risk?," Economics of Education Working Paper Series 0011, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
    Other versions:
  3. Santi Budria & Luis Diaz-Serrano & Ada Ferrer-i-Carbonell & Joop Hartog, 2009. "Risk Attitudes and Wage Growth: Replication and Reconstruction," SOEPpapers 192, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
  4. Diaz-Serrano, Luis & Hartog, Joop, 2004. "Is There a Risk-Return Trade-Off across Occupations? Evidence from Spain," IZA Discussion Papers 1355, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Diaz-Serrano, Luis, 2004. "Labour Income Uncertainty, Risk Aversion and Home Ownership," IZA Discussion Papers 1008, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Budria, Santiago & Diaz-Serrano, Luis & Ferrer-i-Carbonell, Ada & Hartog, Joop, 2009. "Risk Attitude and Wage Growth: Replication and Reconstruction," IZA Discussion Papers 4124, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Luis Diaz-Serrano, 2003. "Earnings Uncertainty, Risk-Aversion and Homeownership," Economics, Finance and Accounting Department Working Paper Series n1350204, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  8. Peter Schneider & Dieter Sadowski, 2008. "The impact of New Public Management (NPM) instruments on PhD education," Discussion Papers 200803, Institute of Labour Law and Industrial Relations in the European Community (IAAEG). [Downloadable!]
  9. Luis Díaz-Serrano & Joop Hartog, 2006. "Is there a risk-return trade-off in educational choices? Evidence from Spain," Investigaciones Economicas, Fundación SEPI, vol. 30(2), pages 353-380, May. [Downloadable!]
  10. Diaz-Serrano, Luis, 2004. "On the Negative Relationship between Labor Income Uncertainty and Homeownership: Risk Aversion vs. Credit Constraints," IZA Discussion Papers 1208, Institute for the Study of Labor (IZA). [Downloadable!]
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