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Risk preference and employment contract type

Author

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  • Sarah Brown
  • Lisa Farrell
  • Mark N. Harris
  • John G. Sessions

Abstract

We explore the possibility that a systematic relationship exists between employment within a particular type of contract and risk preference. We exploit a set of proxies for risk preference, whereby some of the proxies capture risk loving behaviour (expenditure on gambling, smoking and alcohol) whereas others capture risk averse behaviour (expenditure on life and contents insurance, and unearned income). The empirical analysis, based on pooled cross-section data from the UK Family Expenditure Survey, 1997-2000, provides evidence of a systematic relationship between employment contract type and risk preference, with, for example, self-employed workers being more or less likely to engage in the consumption of 'risky' or financial security products respectively. The results are based on the ordered generalized extreme value model, a relatively infrequently used discrete choice model, which allows for ordering and correlation in the alternatives observed. Copyright 2006 Royal Statistical Society.

Suggested Citation

  • Sarah Brown & Lisa Farrell & Mark N. Harris & John G. Sessions, 2006. "Risk preference and employment contract type," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 169(4), pages 849-863.
  • Handle: RePEc:bla:jorssa:v:169:y:2006:i:4:p:849-863
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Scott Drewianka, 2010. "Cross-Sectional Variation In Individuals' Earnings Instability," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(2), pages 291-326, June.
    2. Simon Parker, 2007. "Which firms do the entrepreneurs come from?," Economics Bulletin, AccessEcon, vol. 10(10), pages 1-9.
    3. repec:bla:abacus:v:53:y:2017:i:1:p:59-93 is not listed on IDEAS
    4. Weiping Kostenko & Mark Harris & Xueyan Zhao, 2012. "Occupational transition and country-of-origin effects in the early stage occupational assimilation of immigrants: some evidence from Australia," Applied Economics, Taylor & Francis Journals, vol. 44(31), pages 4019-4035, November.
    5. C Green & J S Heywood, 2007. "Does profit sharing increase training by reducing turnover?," Working Papers 589032, Lancaster University Management School, Economics Department.
    6. Sarah Brown & Michael Dietrich & Aurora Ortiz & Karl Taylor, 2007. "Self-Employment and Risk Preference," Working Papers 2007008, The University of Sheffield, Department of Economics.
    7. Haynes, Jonathan B. & Sessions, John G., 2013. "Work now, pay later? An empirical analysis of the pension–pay trade off," Economic Modelling, Elsevier, vol. 30(C), pages 835-843.
    8. Sari Pekkala Kerr & William R. Kerr & Tina Xu, 2017. "Personality Traits of Entrepreneurs: A Review of Recent Literature," NBER Working Papers 24097, National Bureau of Economic Research, Inc.
    9. repec:ebl:ecbull:v:10:y:2007:i:10:p:1-9 is not listed on IDEAS
    10. Di Mauro, Carmela & Musumeci, Rosy, 2011. "Linking risk aversion and type of employment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(5), pages 490-495.
    11. Brown, Sarah & Dietrich, Michael & Ortiz-Nuñez, Aurora & Taylor, Karl, 2011. "Self-employment and attitudes towards risk: Timing and unobserved heterogeneity," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 425-433, June.
    12. Dawson, Christopher & Henley, Andrew, 2012. "Gender, Risk and Venture Creation Intentions," IZA Discussion Papers 6947, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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