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Risk Aversion and Schooling Decisions

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  • Christian Belzil
  • Marco Leonardi

Abstract

Using unique Italian data in which individual differences in attitudes toward risk are measurable (from a lottery pricing question), we investigate the effect of the individual specific time invariant risk aversion factor on the probability of entering higher education. Apart from the risk aversion factor, absolute risk aversion depends on various state variables (wealth, liquidity constraints, background risk) and is assumed to be measured with non-classical error. We also take into account the endogeneity of the response to the risk aversion question, as well as potential non-classical measurement error in wealth. All model specifications point to the fact that individual specific risk aversion acts as a deterrent to higher education investment.

Suggested Citation

  • Christian Belzil & Marco Leonardi, 2013. "Risk Aversion and Schooling Decisions," Annals of Economics and Statistics, GENES, issue 111-112, pages 35-70.
  • Handle: RePEc:adr:anecst:y:2013:i:111-112:p:35-70
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    Cited by:

    1. Bilkic, N. & Gries, T. & Pilichowski, M., 2012. "Stay in school or start working? — The human capital investment decision under uncertainty and irreversibility," Labour Economics, Elsevier, vol. 19(5), pages 706-717.
    2. Brodaty, Thomas & Gary-Bobo, Robert J. & Prieto, Ana, 2014. "Do risk aversion and wages explain educational choices?," Journal of Public Economics, Elsevier, vol. 117(C), pages 125-148.
    3. Christian Belzil, 2006. "Subjective beliefs and Schooling Decisions," Post-Print halshs-00265466, HAL.
    4. Schweri, Juerg & Hartog, Joop & Wolter, Stefan C., 2011. "Do students expect compensation for wage risk?," Economics of Education Review, Elsevier, vol. 30(2), pages 215-227, April.
    5. repec:kap:jfamec:v:38:y:2017:i:4:d:10.1007_s10834-017-9529-4 is not listed on IDEAS
    6. Dasgupta, Utteeyo & Gangadharan, Lata & Maitra, Pushkar & Mani, Subha & Subramanian, Samyukta, 2015. "Choosing to be trained: Do behavioral traits matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 110(C), pages 145-159.
    7. Mazza, Jacopo & van Ophem, Hans & Hartog, Joop, 2013. "Unobserved heterogeneity and risk in wage variance: Does more schooling reduce earnings risk?," Labour Economics, Elsevier, vol. 24(C), pages 323-338.
    8. Nathan Kettlewell, 2016. "Utilisation and Selection in an Ancillaries Health Insurance Market," Discussion Papers 2016-17, School of Economics, The University of New South Wales.
    9. Dasgupta, Utteeyo & Gangadharan, Lata & Maitra, Pushkar & Mani, Subha & Subramanian, Samyukta, 2011. "Selection into skill accumulation: evidence using observational and experimental data," MPRA Paper 32383, University Library of Munich, Germany.
    10. Paolo Buonanno & Dario Pozzoli, 2007. "Risk Aversion and College Subject," Working Papers (-2012) 0707, University of Bergamo, Department of Economics.
    11. repec:ebl:ecbull:eb-17-00225 is not listed on IDEAS
    12. Fabian T. Pfeffer & Martin Hällsten, 2012. "Mobility Regimes and Parental Wealth: The United States, Germany, and Sweden in Comparison," SOEPpapers on Multidisciplinary Panel Data Research 500, DIW Berlin, The German Socio-Economic Panel (SOEP).

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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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