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Earnings Risk And Demand For Higher Education: A Cross-Section Test For Spain

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Author Info
Joop Hartog () (University of Amsterdam)
Luis Diaz-Serrano (National University of Ireland Maynooth, CREB luis.diaz@may.ie)
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 will be dampened substantially and may even be reversed to positive.

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Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n1370804.

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Length: 33 pages
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:may:mayecw:n1370804

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Postal: Maynooth, Co. Kildare
Phone: 353-1-7083728
Fax: 353-1-7083934
Web page: http://www.may.ie/academic/economics/
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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. Belzil, Christian & Hansen, Jörgen, 2002. "Earnings Dispersion, Risk Aversion and Education," IZA Discussion Papers 513, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Williams, Joseph T, 1979. "Uncertainty and the Accumulation of Human Capital over the Life Cycle," Journal of Business, University of Chicago Press, vol. 52(4), pages 521-48, October. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Li, Tong, 2000. "Estimation of nonlinear errors-in-variables models: a simulated minimum distance estimator," Statistics & Probability Letters, Elsevier, vol. 47(3), pages 243-248, April. [Downloadable!] (restricted)
  5. Shigeru Iwata, 2001. "Recentered And Rescaled Instrumental Variable Estimation Of Tobit And Probit Models With Errors In Variables," Econometric Reviews, Taylor and Francis Journals, vol. 20(3), pages 319-335. [Downloadable!] (restricted)
  6. Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Blackwell Publishing, vol. 55(1), pages 3-26.
  7. Hogan, Vincent & Ian Walker, 2002. "Education Choice under Uncertainty," Royal Economic Society Annual Conference 2002 103, Royal Economic Society. [Downloadable!]
  8. Shigeru Iwata, 1992. "Errors-in-variables regression using estimated latent variables," Econometric Reviews, Taylor and Francis Journals, vol. 11(2), pages 195-200. [Downloadable!] (restricted)
  9. Li, Tong & Hsiao, Cheng, 2004. "Robust estimation of generalized linear models with measurement errors," Journal of Econometrics, Elsevier, vol. 118(1-2), pages 51-65. [Downloadable!] (restricted)
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