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Risk Aversion and Sorting into Public Sector Employment

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  • Pfeifer, Christian

    ()
    (Leuphana University Lüneburg)

Abstract

This research note uses two German data sets – the large-scale German Socio-Economic Panel and unique data from own student questionnaires – to analyse the relationship between risk aversion and the choice for public sector employment. Main results are: (1) more risk averse individuals sort into public sector employment, (2) the impact of career specific and unemployment risk attitudes is larger than the impact of general risk attitudes, and (3) risk taking is rewarded with higher wages in the private but not in the public sector.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3503.

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Length: 22 pages
Date of creation: May 2008
Date of revision:
Publication status: published in: German Economic Review, 2011, 12 (1), 85 - 99
Handle: RePEc:iza:izadps:dp3503

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Keywords: wage differentials; public sector; risk aversion; sorting;

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References

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  1. Pederson, P. J. & Schmidt-Sorensen, J. B. & Smith, N. & Westergard-Nielsen, N., 1990. "Wage differentials between the public and private sectors," Journal of Public Economics, Elsevier, Elsevier, vol. 41(1), pages 125-145, February.
  2. Christian Dustmann & Arthur Van Soest, 1997. "Wage structures in the private and public sectors in West Germany," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 18(3), pages 225-247, August.
  3. Rebecca M. Blank, 1985. "An analysis of workers' choice between employment in the public and private sectors," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, ILR Review, Cornell University, ILR School, vol. 38(2), pages 211-224, January.
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  5. Luechinger, Simon & Stutzer, Alois & Winkelmann, Rainer, 2006. "The Happiness Gains from Sorting and Matching in the Labor Market," IZA Discussion Papers, Institute for the Study of Labor (IZA) 2019, Institute for the Study of Labor (IZA).
  6. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
  7. 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.
  8. Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, Springer, vol. 30(2), pages 505-520, 09.
  9. Mueller, Richard E., 1998. "Public-private sector wage differentials in Canada: evidence from quantile regressions," Economics Letters, Elsevier, Elsevier, vol. 60(2), pages 229-235, August.
  10. Dustmann, Christian & van Soest, Arthur, 1998. "Public and private sector wages of male workers in Germany," European Economic Review, Elsevier, Elsevier, vol. 42(8), pages 1417-1441, September.
  11. George J. Borjas, 2002. "The Wage Structure and the Sorting of Workers into the Public Sector," NBER Working Papers, National Bureau of Economic Research, Inc 9313, National Bureau of Economic Research, Inc.
  12. Markus Pannenberg, 2007. "Risk Aversion and Reservation Wages," SOEPpapers on Multidisciplinary Panel Data Research, DIW Berlin, The German Socio-Economic Panel (SOEP) 23, DIW Berlin, The German Socio-Economic Panel (SOEP).
  13. James M. Poterba & Kim S. Rueben, 1994. "The Distribution of Public Sector Wage Premia: New Evidence Using Quantile Regression Methods," NBER Working Papers, National Bureau of Economic Research, Inc 4734, National Bureau of Economic Research, Inc.
  14. 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, ILR Review, Cornell University, ILR School, vol. 34(3), pages 408-412, April.
  15. Joni Hersch & W. Kip Viscusi, 1990. "Cigarette Smoking, Seatbelt Use, and Differences in Wage-Risk Tradeoffs," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 25(2), pages 202-227.
  16. Shaw, Kathryn L, 1996. "An Empirical Analysis of Risk Aversion and Income Growth," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(4), pages 626-53, October.
  17. Feinberg, Robert M, 1977. "Risk Aversion, Risk, and the Duration of Unemployment," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 59(3), pages 264-71, August.
  18. Pissarides, Christopher A, 1974. "Risk, Job Search, and Income Distribution," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(6), pages 1255-67, Nov.-Dec..
  19. Pannenberg, Markus, 2007. "Risk Aversion and Reservation Wages," IZA Discussion Papers, Institute for the Study of Labor (IZA) 2806, Institute for the Study of Labor (IZA).
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