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Risk aversion and schooling decisions

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  • Christian Belzil

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, ENSAE - École Nationale de la Statistique et de l'Administration Économique - ENSAE ParisTech)

  • Marco Leonardi

    (Università degli studi di Milano - Università di Milano - Università degli studi di Milano)

Abstract

Using unique Italian panel data in which individual differences in attitudes toward risk are measurable (from a lottery pricing question), we investigate the effect of the individual specific time invariant risk aversion factor on the probability of entering higher education. Apart from the risk aversion factor, absolute risk aversion depends on various state variables (wealth, liquidity constraints, back- ground risk) and is assumed to be measured with nonclassical error. We also take into account the endogeneity of the response to the risk aversion question, as well as potential non-classical measurement error in wealth. All model specifications point out to the fact that individual specific risk aversion acts as a deterrent to higher education investment.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00411099.

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Date of creation: 26 Aug 2009
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Handle: RePEc:hal:wpaper:hal-00411099

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Keywords: Risk Aversion; Ex-ante risk; schooling; subjective beliefs; dynamic discrete choices;

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Citations

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Cited by:
  1. Belzil, Christian, 2007. "Subjective Beliefs and Schooling Decisions," IZA Discussion Papers 2820, Institute for the Study of Labor (IZA).
  2. Schweri, Juerg & Hartog, Joop & Wolter, Stefan C., 2011. "Do students expect compensation for wage risk?," Economics of Education Review, Elsevier, vol. 30(2), pages 215-227, April.
  3. Fabian T. Pfeffer & Martin Hällsten, 2012. "Mobility Regimes and Parental Wealth: The United States, Germany, and Sweden in Comparison," SOEPpapers on Multidisciplinary Panel Data Research 500, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Paolo Buonanno & Dario Pozzoli, 2007. "Risk Aversion and College Subject," Working Papers 0707, University of Bergamo, Department of Economics.
  5. Dasgupta, Utteeyo & Gangadharan, Lata & Maitra, Pushkar & Mani, Subha & Subramanian, Samyukta, 2011. "Selection into skill accumulation: evidence using observational and experimental data," MPRA Paper 32383, University Library of Munich, Germany.
  6. 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.
  7. 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.

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