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Earnings Risk and Demand for Higher Education: A Cross-Section Test for Spain

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Author Info
Hartog, Joop () (University of Amsterdam and IZA Bonn)
Serrano, Luis Diaz (CREB, University of Barcelona)
Abstract

We develop a simple human capital model for optimum schooling length when earnings are stochastic, and highlight the pivotal role of risk attitudes and the schooling gradient of earnings risk. We use Spanish data to document the gradient and to estimate individual response to earnings risk in deciding on attending university education, by measuring risk as the residual variance in regional earnings functions. We find that the basic response is negative but that in households with lower risk aversion, the response may be reversed to positive.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 641.

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Length: 18 pages
Date of creation: Nov 2002
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Handle: RePEc:iza:izadps:dp641

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Related research
Keywords: earnings risk; schooling decisions;

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Find related papers by JEL classification:
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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  1. 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). [Downloadable!]
    Other versions:
  2. Luis Diaz-Serrano & J. Hartog, 2004. "Is there a Risk-Return Trade-off across Occupations? Evidence from Spain," Economics, Finance and Accounting Department Working Paper Series n1441004, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  3. Diaz-Serrano, Luis & Hartog, Joop, 2004. "Is There a Risk-Return Trade-Off across Occupations? Evidence from Spain," IZA Discussion Papers 1355, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Bas Jacobs, 2007. "Real Options and Human Capital Investment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
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