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Do students expect compensation for wage risk?

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  • Schweri, Juerg
  • Hartog, Joop
  • Wolter, Stefan C.

Abstract

We use a unique data set about the wage distribution that Swiss students expect for themselves ex ante, deriving parametric and non-parametric measures to capture expected wage risk. These wage risk measures are unfettered by heterogeneity which handicapped the use of actual market wage dispersion as risk measure in earlier studies. Students in our sample anticipate that the market provides compensation for risk, as has been established with risk augmented Mincer earnings equations estimated on market data: higher wage risk for educational groups is associated with higher mean wages. With observations on risk as expected by students we find compensation at similar elasticities as observed in market data. The results are robust to different specifications and estimation models.

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Bibliographic Info

Article provided by Elsevier in its journal Economics of Education Review.

Volume (Year): 30 (2011)
Issue (Month): 2 (April)
Pages: 215-227

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Handle: RePEc:eee:ecoedu:v:30:y:2011:i:2:p:215-227

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Web page: http://www.elsevier.com/locate/econedurev

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Keywords: Wage Expectations Wage risk Risk compensation Skewness;

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References

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Citations

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Cited by:
  1. Tacsir, Ezequiel, 2010. "Making your own future: Expectations and occupation choice," MERIT Working Papers 058, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Mazza, Jacopo & Hartog, Joop, 2011. "Do They Understand the Benefits from Education? Evidence on Dutch High School Students’ Earnings Expectations," IZA Discussion Papers 5714, Institute for the Study of Labor (IZA).
  3. Mazza, Jacopo & van Ophem, Hans & Hartog, Joop, 2013. "Unobserved heterogeneity and risk in wage variance: Does more schooling reduce earnings risk?," Labour Economics, Elsevier, vol. 24(C), pages 323-338.
  4. Kässi, Otto, 2012. "Uncertainty and Heterogeneity in Returns to Education: Evidence from Finland," MPRA Paper 48738, University Library of Munich, Germany, revised 01 Aug 2013.
  5. Simone N. Tuor & Uschi Backes-Gellner, 2010. "Risk-return trade-offs to different educational paths: vocational, academic and mixed," International Journal of Manpower, Emerald Group Publishing, vol. 31(5), pages 495-519, September.
  6. 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).

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