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Educational Choice and Risk Aversion: How Important Is Structural vs. Individual Risk Aversion?

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  • Vanessa Hartlaub
  • Thorsten Schneider
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    Abstract

    According to sociological theories on educational choice, risk aversion is the main driving force for class-specific educational decisions. Families from upper social classes have to opt for the academically most demanding, long-lasting courses to avoid an intergenerational status loss. Families from lower social classes by contrast, tend instead to opt for shorter tracks to reduce the risk of failing in a long-lasting and costly education and, as a consequence, entering the labor market without a degree. This argument is deeply rooted in the social structure. Yet, the importance of individual risk preferences for educational choice has been neglected in sociology of education. We discuss these different forms of risk in the context of social inequalities in educational decision-making and demonstrate how they influence the intentions for further education of students attending the most demanding, academically orientated secondary school type in Germany. According to our argument, children from upper social classes are structurally almost compelled to opt for the academically most demanding educational courses, virtually without having a choice in the matter. In contrast, working class children do have to make an active decision and, thus, individual risk aversion comes into play for these students.. - For our empirical analyses, we rely on data from the youth questionnaire of the German Socio-Economic Panel Study (SOEP) collected in the years 2003 to 2010, and estimate multinomial logit models. Our empirical findings underline the importance of the structural risk aversion. Students with a higher social background are not only less sensitive to their school performance, but individual risk aversion is also completely irrelevant to their educational plans. The opposite applies to students with a lower social background: the more risk-averse they are, the more likely they are to opt for a double qualification rather than just a purely academic university degree course.

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    Bibliographic Info

    Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 433.

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    Length: 39 p.
    Date of creation: 2012
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    Handle: RePEc:diw:diwsop:diw_sp433

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    Keywords: Educational inequality; educational decision-making; risk aversion; tertiary education; vocational training;

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    1. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Working Papers, Geary Institute, University College Dublin 200827, Geary Institute, University College Dublin.
    2. Bonin, Holger & Dohmen, Thomas & Falk, Armin & Huffman, David B. & Sunde, Uwe, 2006. "Cross-sectional Earnings Risk and Occupational Sorting: The Role of Risk Attitudes," IZA Discussion Papers 1930, Institute for the Study of Labor (IZA).
    3. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP): Scope, Evolution and Enhancements," SOEPpapers on Multidisciplinary Panel Data Research 1, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 9(3), pages 522-550, 06.
    5. Uhlig, Johannes & Solga, Heike & Schupp, Jürgen, 2009. "Bildungsungleichheiten und blockierte Lernpotenziale: welche Bedeutung hat die Persönlichkeitsstruktur für diesen Zusammenhang?," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 418-440.
    6. Lutz Bellmann & Florian Janik, 2010. "Abitur and What Next? Reasons for Gaining Double Qualifications in Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, Duncker & Humblot, Berlin, vol. 130(1), pages 1-18.
    7. Patrick Royston, 2005. "Multiple imputation of missing values: Update of ice," Stata Journal, StataCorp LP, StataCorp LP, vol. 5(4), pages 527-536, December.
    8. Weiss, Yoram, 1972. "The Risk Element in Occupational and Educational Choices," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(6), pages 1203-13, Nov.-Dec..
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