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Risk Aversion and Sorting into Public Sector Employment

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  • Christian Pfeifer

Abstract

This research note uses two German data sets – the large-scale German Socio-Economic Panel and unique data from own student questionnaires – to analyse the relationship between risk aversion and the choice for public sector employment. Main results are: (1) more risk averse individuals sort into public sector employment, (2) the impact of career specific and unemployment risk attitudes is larger than the impact of general risk attitudes, and (3) risk taking is rewarded with higher wages in the private but not in the public sector.
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Suggested Citation

  • Christian Pfeifer, 2011. "Risk Aversion and Sorting into Public Sector Employment," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 85-99, February.
  • Handle: RePEc:bla:germec:v:12:y:2011:i:1:p:85-99
    DOI: j.1468-0475.2010.00505.x
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    File URL: http://hdl.handle.net/10.1111/j.1468-0475.2010.00505.x
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    References listed on IDEAS

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    1. George J. Borjas, 2002. "The Wage Structure and the Sorting of Workers into the Public Sector," NBER Working Papers 9313, National Bureau of Economic Research, Inc.
    2. Andrew Clark & Fabien Postel-Vinay, 2009. "Job security and job protection," Oxford Economic Papers, Oxford University Press, vol. 61(2), pages 207-239, April.
    3. James M. Poterba & Kim S. Rueben, 1994. "The Distribution of Public Sector Wage Premia: New Evidence Using Quantile Regression Methods," NBER Working Papers 4734, National Bureau of Economic Research, Inc.
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    5. Feinberg, Robert M, 1977. "Risk Aversion, Risk, and the Duration of Unemployment," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 264-271, August.
    6. Joni Hersch & W. Kip Viscusi, 1990. "Cigarette Smoking, Seatbelt Use, and Differences in Wage-Risk Tradeoffs," Journal of Human Resources, University of Wisconsin Press, vol. 25(2), pages 202-227.
    7. Christian Dustmann & Arthur Van Soest, 1997. "Wage structures in the private and public sectors in West Germany," Fiscal Studies, Institute for Fiscal Studies, vol. 18(3), pages 225-247, August.
    8. Mueller, Richard E., 1998. "Public-private sector wage differentials in Canada: evidence from quantile regressions," Economics Letters, Elsevier, vol. 60(2), pages 229-235, August.
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    10. Pederson, P. J. & Schmidt-Sorensen, J. B. & Smith, N. & Westergard-Nielsen, N., 1990. "Wage differentials between the public and private sectors," Journal of Public Economics, Elsevier, vol. 41(1), pages 125-145, February.
    11. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
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    16. Shaw, Kathryn L, 1996. "An Empirical Analysis of Risk Aversion and Income Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 626-653, October.
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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