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Do Students Expect Compensation for Wage Risk?

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Author Info
Schweri, Jürg () (Swiss Federal Institute for Vocational Education and Training)
Hartog, Joop () (University of Amsterdam)
Wolter, Stefan () (University of Bern)

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Abstract

We use a unique data set about the wage distribution that Swiss students expect for themselves ex ante, deriving parametric and non-parametric measures to capture expected wage risk. These wage risk measures are unfettered by heterogeneity which handicapped the use of actual market wage dispersion as risk measure in earlier studies. Students in our sample anticipate that the market provides compensation for risk, as has been established with Risk Augmented Mincer earnings equations estimated on market data: higher wage risk for educational groups is associated with higher mean wages. With observations on risk as expected by students we find compensation at similar elasticities as observed in market data. The results are robust to different specifications and estimation models.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4069.

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Length: 27 pages
Date of creation: Mar 2009
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Handle: RePEc:iza:izadps:dp4069

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Related research
Keywords: wage; expectations; wage risk; risk compensation; skewness;

Other versions of this item:

Find related papers by JEL classification:
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
I2 - Health, Education, and Welfare - - Education
J2 - Labor and Demographic Economics - - Demand and Supply of Labor
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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    Other versions:
  2. Joop Hartog & Erik Plug & Luis Diaz Serrano & Jose Vieira, 2003. "Risk compensation in wages – a replication," Empirical Economics, Springer, vol. 28(3), pages 639-647, July. [Downloadable!] (restricted)
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    Other versions:
  6. McGoldrick, Kimmarie & Robst, John, 1996. "The Effect of Worker Mobility on Compensating Wages for Earnings Risk," Applied Economics, Taylor and Francis Journals, vol. 28(2), pages 221-32, February. [Downloadable!] (restricted)
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