Education, Risk Preference and Wages
AbstractWe explore the effect of risk preference on the educational attainment and wages of a sample of individuals drawn from the U.S. Panel Study of Income Dynamics (PSID). Using a sequence of questions from the 1996 PSID, we are able to construct measures of risk aversion and risk tolerance allowing us to explore the implications of interpersonal differences in risk preference for educational attainment. Our empirical findings suggest that risk preference has a significant influence on human capital accumulation, with the degree of risk aversion (tolerance) being inversely (positively) associated with educational attainment. In addition, our findings suggest that risk preference is a valid instrument for education in a standard Mincerian earnings function.
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Bibliographic InfoPaper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2006002.
Length: 27 pages
Date of creation: Feb 2006
Date of revision: Feb 2006
Human Capital; Risk Aversion; Risk Preference; Wages.;
Find related papers by JEL classification:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-17 (All new papers)
- NEP-EDU-2007-03-17 (Education)
- NEP-HRM-2007-03-17 (Human Capital & Human Resource Management)
- NEP-UPT-2007-03-17 (Utility Models & Prospect Theory)
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