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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. Pannenberg, Markus, 2007. "Risk Aversion and Reservation Wages," IZA Discussion Papers 2806, Institute for the Study of Labor (IZA).
  2. Simon Luechinger & Alois Stutzer & Rainer Winkelmann, 2007. "The Happiness Gains From Sorting and Matching in the Labor Market," Working papers, Faculty of Business and Economics - University of Basel 2007/01, Faculty of Business and Economics - University of Basel.
  3. Feinberg, Robert M, 1977. "Risk Aversion, Risk, and the Duration of Unemployment," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 264-71, August.
  4. 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.
  5. Joni Hersch & W. Kip Viscusi, 1990. "Cigarette Smoking, Seatbelt Use, and Differences in Wage-Risk Tradeoffs," Journal of Human Resources, University of Wisconsin Press, vol. 25(2), pages 202-227.
  6. Andrew Clark & Fabien Postel-Vinay, 2005. "Job security and job protection," LSE Research Online Documents on Economics 19904, London School of Economics and Political Science, LSE Library.
  7. Markus Pannenberg, 2007. "Risk Aversion and Reservation Wages," SOEPpapers on Multidisciplinary Panel Data Research 23, DIW Berlin, The German Socio-Economic Panel (SOEP).
  8. 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.
  9. Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, vol. 30(2), pages 505-520, 09.
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  12. 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.
  13. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-63, December.
  14. James M. Poterba & Kim S. Rueben, 1994. "The Distribution of Public Sector Wage Premia: New Evidence Using Quantile Regression Methods," NBER Working Papers 4734, National Bureau of Economic Research, Inc.
  15. 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, vol. 41(1), pages 125-145, February.
  16. 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, vol. 38(2), pages 211-224, January.
  17. George J. Borjas, 2002. "The Wage Structure and the Sorting of Workers into the Public Sector," NBER Working Papers 9313, National Bureau of Economic Research, Inc.
  18. Mueller, Richard E., 1998. "Public-private sector wage differentials in Canada: evidence from quantile regressions," Economics Letters, Elsevier, vol. 60(2), pages 229-235, August.
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