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Risk Aversion And Major Choice: Evidence From Italian Students

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Author Info

  • Maria De Paola

    ()

  • Francesca Gioia

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

Abstract

Does the choice of the field of study depend on individual risk aversion? The direction of the relationship between individual risk attitudes and type of college major chosen is potentially ambiguous. On the one hand, risk adverse individuals may prefer majors allowing high returns on the labour market; on the other hand, if these majors expose students to a higher probability of dropping out, those who are more risk adverse may be induced to choose less challenging fields. Using data from a sample of students enrolled in 2009 at a middle-sized Italian public University, we find that, controlling for a large number of individual characteristics, including cognitive abilities, personality traits and family background, more risk adverse students are more likely to choose any other field (Humanities, Engineering and Sciences) compared to Social Sciences. We interpret this result considering that some of these fields, such as Humanities, allow to reduce the risk of dropping out, while others (such as Engineering and Sciences)involve a lower risk on the labour market. It also emerges that the effect of risk aversion on major choice is related to student ability. Risk adverse students characterized by high abilities tend to prefer Engineering, while the propensity of risk adverse students to enrol in Humanities decreases when ability increases, suggesting that the attention paid to labour market risks and drop out risks varies according to student skills.

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File URL: http://www.ecostat.unical.it/RePEc/WorkingPapers/WP07_2011.pdf
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Bibliographic Info

Paper provided by Università della Calabria, Dipartimento di Scienze Economiche, Statistiche e Finanziarie (Ex Dipartimento di Economia e Statistica) in its series Working Papers with number 201107.

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Length: 19 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:clb:wpaper:201107

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Postal: Università della Calabria, Dipartimento di Scienze Economiche, Statistiche e Finanziarie, Ponte Pietro Bucci, Cubo 0/C, I-87036 Arcavacata di Rende, CS, Italy
Phone: +39 0984 492413
Fax: +39 0984 492421
Web page: http://www.unical.it/portale/strutture/dipartimenti_240/disesf/
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Keywords: Risk aversion; College choice; Education;

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References

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  1. Rochat, Denis & Demeulemeester, Jean-Luc, 2001. "Rational choice under unequal constraints: the example of Belgian higher education," Economics of Education Review, Elsevier, vol. 20(1), pages 15-26, February.
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  12. Montmarquette, Claude & Mahseredjian, Sophie & Houle, Rachel, 2001. "The determinants of university dropouts: a bivariate probability model with sample selection," Economics of Education Review, Elsevier, vol. 20(5), pages 475-484, October.
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  14. Maria De Paola, 2010. "The Determinants Of Risk Aversion: The Role Of Intergenerational Transmission," Working Papers 201016, Università della Calabria, Dipartimento di Scienze Economiche, Statistiche e Finanziarie (Ex Dipartimento di Economia e Statistica).
  15. Alexandra C. Achen & Paul N. Courant, 2009. "What Are Grades Made Of?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 77-92, Summer.
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