Simulating the Risk of Investment in Human Capital
AbstractThe risk of investment in schooling has largely been ignored. We mimic the investment decision facing a student and simulate risky earnings profiles in alternative options, with parameters taken from the very limited evidence. The distribution of rates of return appears positively skewed. Our best estimate of ex ante risk in university education is a coefficient of variation of about 0.3, comparable with that in a randomly selected financial portfolio with some 30 stocks. With risk attitudes varying by parental background, this may be relevant for differences in schooling participation rates. Allowing for stochastic components in earnings also markedly affects expected returns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Education Economics.
Volume (Year): 15 (2007)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://taylorandfrancis.metapress.com/link.asp?target=journal&id=104532
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Natasa Bilkic & Thomas Gries & Margarethe Pilichowski, 2009.
"Stay in School or Start Working? - The Human Capital Investment Decision under Uncertainty and Irreversibility,"
CESifo Working Paper Series
2825, CESifo Group Munich.
- Bilkic, N. & Gries, T. & Pilichowski, M., 2012. "Stay in school or start working? — The human capital investment decision under uncertainty and irreversibility," Labour Economics, Elsevier, vol. 19(5), pages 706-717.
- Paolo Buonanno & Dario Pozzoli, 2007. "Risk Aversion and College Subject," Working Papers 0707, University of Bergamo, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.