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Is There a Risk-Return Trade-Off across Occupations? Evidence from Spain

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  • Diaz-Serrano, Luis

    ()
    (Universitat Rovira i Virgili)

  • Hartog, Joop

    ()
    (University of Amsterdam)

Abstract

We use data from Spain to test for an effect of earnings risk and skewness on individual wages. We carry out separate estimation for men, women, public and private sector employees. In accordance with previous evidence for the US we show the existence of a riskreturn trade-off across occupations in the Spanish labour market. These results are in conformity with preferences of risk-averse individuals with decreasing absolute risk aversion.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1355.

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Length: 26 pages
Date of creation: Oct 2004
Date of revision:
Publication status: published as 'Is there a risk-return trade-off in educational choices? Evidence from Spain' in: Investigaciones Economicas, 2006, 30 (2), 353-380
Handle: RePEc:iza:izadps:dp1355

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Keywords: occupational choices; skewness affection; risk-aversion; compensating wage differentials;

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References

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  1. Belzil, Christian & Hansen, Jörgen, 2002. "Earnings Dispersion, Risk Aversion and Education," IZA Discussion Papers 513, Institute for the Study of Labor (IZA).
  2. Don Bellante & Albert N. Link, 1981. "Are public sector workers more risk averse than private sector workers?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(3), pages 408-412, April.
  3. de Meza, David, 1984. "Wage Uncertainty, Expected Utility, and Occupation Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(3), pages 757-62, October.
  4. Joop Hartog & Luis Díaz-Serrano, 2007. "Earnings risk and demand for higher education: A cross-section test for Spain," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 1-28, May.
  5. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  6. Joseph Golec & Maurry Tamarkin, 1998. "Bettors Love Skewness, Not Risk, at the Horse Track," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(1), pages 205-225, February.
  7. Williams, Joseph T, 1979. "Uncertainty and the Accumulation of Human Capital over the Life Cycle," The Journal of Business, University of Chicago Press, vol. 52(4), pages 521-48, October.
  8. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, Econometric Society, vol. 46(1), pages 33-50, January.
  9. Hartog, Joop & Vijverberg, Wim P., 2002. "Do Wages Really Compensate for Risk Aversion and Skewness Affection?," IZA Discussion Papers 426, Institute for the Study of Labor (IZA).
  10. Diaz-Serrano, Luis, 2005. "Labor income uncertainty, skewness and homeownership: A panel data study for Germany and Spain," Journal of Urban Economics, Elsevier, vol. 58(1), pages 156-176, July.
  11. Joop Hartog & Erik Plug & Luis Diaz Serrano & Jose Vieira, 2003. "Risk compensation in wages – a replication," Empirical Economics, Springer, Springer, vol. 28(3), pages 639-647, July.
  12. Diaz-Serrano, Luis & Hartog, Joop & Nielsen, Helena Skyt, 2003. "Compensating Wage Differentials for Schooling Risk in Denmark," IZA Discussion Papers 963, Institute for the Study of Labor (IZA).
  13. Kodde, David A, 1986. "Uncertainty and the Demand for Education," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 460-67, August.
  14. Hogan, Vincent & Ian Walker, 2002. "Education Choice under Uncertainty," Royal Economic Society Annual Conference 2002, Royal Economic Society 103, Royal Economic Society.
  15. Renate Schubert, 1999. "Financial Decision-Making: Are Women Really More Risk-Averse?," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 381-385, May.
  16. Garrett, Thomas A. & Sobel, Russell S., 1999. "Gamblers favor skewness, not risk: Further evidence from United States' lottery games," Economics Letters, Elsevier, Elsevier, vol. 63(1), pages 85-90, April.
  17. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, American Economic Association, vol. 64(6), pages 950-63, December.
  18. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  19. Snow, Arthur & Warren, Ronald S, Jr, 1990. "Human Capital Investment and Labor Supply under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 195-206, February.
  20. Mattila, J. Peter & Orazem, Peter, 1986. "Occupational Entry and Uncertainty: Males Leaving High School," Staff General Research Papers 10847, Iowa State University, Department of Economics.
  21. Siow, Aloysius, 1984. "Occupational Choice under Uncertainty," Econometrica, Econometric Society, Econometric Society, vol. 52(3), pages 631-45, May.
  22. Christiansen, Charlotte & Nielsen, Helena Skyt, 2002. "The Educational Asset Market: A Finance Perspective on Human Capital Investment," Working Papers, University of Aarhus, Aarhus School of Business, Department of Economics 02-10, University of Aarhus, Aarhus School of Business, Department of Economics.
  23. Diaz-Serrano, L. & Hartog, J. & Skyt Nielsen, H., 2003. "Compensating Wage Differentials for Schooling Risk in Denmark," Economics, Finance and Accounting Department Working Paper Series, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth n1271003, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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