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Relative Risk Aversion and Social Reproduction in Intergenerational Educational Attainment: Application of a Dynamic Discrete Choice Mode

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  • Anders Holm

    (Department of Sociology, University of Copenhagen)

  • Mads Meier Jæger

    (The Danish National Institute of Social Research)

Abstract

The theory of Relative Risk Aversion (RRA) claims that educational decision-making is ultimately motivated by the individual’s desire to avoid downward social class mobility, and that this desire is stronger than the desire to pursue upward mobility. This paper implements a dynamic programming model which tests the central behavioral assumption in the RRA theory stating that (1) individuals are forward-looking when choosing education and (2) that the RRA mechanism comprises an important component in the educational decision-making process. Using data from the Danish Youth Longitudinal Study, we find strong evidence of RRA in educational decision-making over and above the effect of traditional social background variables.

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File URL: http://www.econ.ku.dk/cam/wp0910/wp0406/2006-04.pdf/
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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2006-04.

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Length: 38 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:kud:kuieca:2006_04

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  1. Taber, Christopher R., 2000. "Semiparametric identification and heterogeneity in discrete choice dynamic programming models," Journal of Econometrics, Elsevier, Elsevier, vol. 96(2), pages 201-229, June.
  2. Charles T. Clotfelter & Michael Rothschild, 1993. "Studies of Supply and Demand in Higher Education," NBER Books, National Bureau of Economic Research, Inc, number clot93-1, July.
  3. Daniel Houser & Michael Keane & Kevin McCabe, 2004. "Behavior in a Dynamic Decision Problem: An Analysis of Experimental Evidence Using a Bayesian Type Classification Algorithm," Econometrica, Econometric Society, Econometric Society, vol. 72(3), pages 781-822, 05.
  4. Arcidiacono, Peter, 2002. "Ability Sorting and the Returns to College Major," Working Papers, Duke University, Department of Economics 02-26, Duke University, Department of Economics.
  5. Bauer, Thomas K. & Gang, Ira N., 2000. "Sibling Rivalry in Educational Attainment: The German Case," IZA Discussion Papers 180, Institute for the Study of Labor (IZA).
  6. Eskil Heinesen & Richard Davies & Anders Holm, 2002. "The relative risk aversion hypothesis of educational choice," Journal of Population Economics, Springer, Springer, vol. 15(4), pages 683-713.
  7. Emer Smyth, 1999. "Educational Inequalities Among School Leavers in Ireland 1979-1994," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 30(3), pages 267-284.
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