IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v65y2014icp66-89.html
   My bibliography  Save this article

Intergenerational transmission of risk attitudes – A revealed preference approach

Author

Listed:
  • Necker, Sarah
  • Voskort, Andrea

Abstract

This study investigates whether children and parents show a similar willingness to take risk in their choice of occupation. Using data from the German Socio-Economic Panel, we calculate the occupational variation in earnings unexplained by human capital differences to obtain a measure of occupational risk. We find that fathers' earnings risk is significantly positively related to sons' earnings risk. The same link is found when unemployment risk is considered. However, a conclusion indicated by previous studies based on self-reports of individuals' risk attitude as well as our findings is that intergenerational transmission is weak in terms of effect size.

Suggested Citation

  • Necker, Sarah & Voskort, Andrea, 2014. "Intergenerational transmission of risk attitudes – A revealed preference approach," European Economic Review, Elsevier, vol. 65(C), pages 66-89.
    • Handle: RePEc:eee:eecrev:v:65:y:2014:i:c:p:66-89
    DOI: 10.1016/j.euroecorev.2013.10.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292113001323
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2012. "The Intergenerational Transmission of Risk and Trust Attitudes," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 645-677.
    2. Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2008. "How are preferences revealed?," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1787-1794, August.
    3. Bellemare, Charles & Shearer, Bruce, 2010. "Sorting, incentives and risk preferences: Evidence from a field experiment," Economics Letters, Elsevier, vol. 108(3), pages 345-348, September.
    4. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    5. Shore, Stephen H., 2011. "The Intergenerational Transmission of Income Volatility: Is Riskiness Inherited?," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(3), pages 372-381.
    6. Bonin, Holger & Dohmen, Thomas & Falk, Armin & Huffman, David & Sunde, Uwe, 2007. "Cross-sectional earnings risk and occupational sorting: The role of risk attitudes," Labour Economics, Elsevier, vol. 14(6), pages 926-937, December.
    7. Michael Hout & Harvey Rosen, 2000. "Self-Employment, Family Background, and Race," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 670-692.
    8. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
    9. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1-9.
    10. Gary Solon, 2002. "Cross-Country Differences in Intergenerational Earnings Mobility," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 59-66, Summer.
    11. Dmytro Hryshko & María José Luengo‐Prado & Bent E. Sørensen, 2011. "Childhood determinants of risk aversion: The long shadow of compulsory education," Quantitative Economics, Econometric Society, vol. 2(1), pages 37-72, March.
    12. Fouarge, Didier & Kriechel, Ben & Dohmen, Thomas, 2014. "Occupational sorting of school graduates: The role of economic preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 335-351.
    13. Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
    14. Solon, Gary, 1999. "Intergenerational mobility in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 29, pages 1761-1800, Elsevier.
    15. Flavio Cunha & James Heckman & Salvador Navarro, 2005. "Separating uncertainty from heterogeneity in life cycle earnings," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 191-261, April.
    16. Miles S. Kimball & Claudia R. Sahm & Matthew D. Shapiro, 2009. "Risk Preferences in the PSID: Individual Imputations and Family Covariation," American Economic Review, American Economic Association, vol. 99(2), pages 363-368, May.
    17. Steven Haider & Gary Solon, 2006. "Life-Cycle Variation in the Association between Current and Lifetime Earnings," American Economic Review, American Economic Association, vol. 96(4), pages 1308-1320, September.
    18. Mincer, Jacob & Polachek, Solomon, 1974. "Family Investment in Human Capital: Earnings of Women," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 76-108, Part II, .
    19. Charlotte Bartels & Timm Bönke, 2013. "Can Households And Welfare States Mitigate Rising Earnings Instability?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(2), pages 250-282, June.
    20. Jason Long & Joseph Ferrie, 2007. "The Path to Convergence: Intergenerational Occupational Mobility in Britain and the US in Three Eras," Economic Journal, Royal Economic Society, vol. 117(519), pages 61-71, March.
    21. Pfajfar, Damjan & Santoro, Emiliano, 2010. "Heterogeneity, learning and information stickiness in inflation expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 426-444, September.
    22. Thomas Dohmen & Armin Falk, 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender," American Economic Review, American Economic Association, vol. 101(2), pages 556-590, April.
    23. Rosen, H.S.Harvey S. & Wu, Stephen, 2004. "Portfolio choice and health status," Journal of Financial Economics, Elsevier, vol. 72(3), pages 457-484, June.
    24. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
    25. Michael Baker & Gary Solon, 2003. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 267-288, April.
    26. Maria Paola, 2013. "The Determinants of Risk Aversion: The Role of Intergenerational Transmission," German Economic Review, Verein für Socialpolitik, vol. 14(2), pages 214-234, May.
    27. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    28. Thomas DeLeire & Helen Levy, 2004. "Worker Sorting and the Risk of Death on the Job," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 925-954, October.
    29. Joop Hartog & Ada Ferrer‐i‐Carbonell & Nicole Jonker, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
    30. Kerwin Kofi Charles & Erik Hurst, 2003. "The Correlation of Wealth across Generations," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1155-1182, December.
    31. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 7, pages 307-458, Elsevier.
    32. David Cesarini & Christopher T. Dawes & Magnus Johannesson & Paul Lichtenstein & Björn Wallace, 2009. "Genetic Variation in Preferences for Giving and Risk Taking," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 809-842.
    33. Bernd Fitzenberger & Astrid Kunze, 2005. "Vocational Training and Gender: Wages and Occupational Mobility among Young Workers," Oxford Review of Economic Policy, Oxford University Press, vol. 21(3), pages 392-415, Autumn.
    34. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital," American Economic Review, American Economic Association, vol. 95(1), pages 437-449, March.
    35. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
    36. Christian Pfeifer, 2011. "Risk Aversion and Sorting into Public Sector Employment," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 85-99, February.
    37. Le, Anh T. & Miller, Paul W. & Slutske, Wendy S. & Martin, Nicholas G., 2010. "Are Attitudes Towards Economic Risk Heritable? Analyses Using the Australian Twin Study of Gambling," IZA Discussion Papers 4859, Institute of Labor Economics (IZA).
    38. Moretti, Enrico, 2000. "Do Wages Compensate for Risk of Unemployment? Parametric and Semiparametric Evidence from Seasonal Jobs," Journal of Risk and Uncertainty, Springer, vol. 20(1), pages 45-66, January.
    39. Dynan Karen & Elmendorf Douglas & Sichel Daniel, 2012. "The Evolution of Household Income Volatility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(2), pages 1-42, December.
    40. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-1120, December.
    41. Joop Hartog & Erik Plug & Luis Diaz Serrano & Jose Vieira, 2003. "Risk compensation in wages – a replication," Empirical Economics, Springer, vol. 28(3), pages 639-647, July.
    42. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281-281.
    43. Guiso, Luigi & Paiella, Monica, 2004. "The Role of Risk Aversion in Predicting Individual Behaviours," CEPR Discussion Papers 4591, C.E.P.R. Discussion Papers.
    44. Bas Jacobs & Joop Hartog & Wim Vijverberg, 2009. "Self-selection bias in estimated wage premiums for earnings risk," Empirical Economics, Springer, vol. 37(2), pages 271-286, October.
    45. Moshe Buchinsky & Denis Fougère & Francis Kramarz & Rusty Tchernis, 2010. "Interfirm Mobility, Wages and the Returns to Seniority and Experience in the United States," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 972-1001.
    46. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
    47. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, October.
    48. Ekelund, Jesper & Johansson, Edvard & Jarvelin, Marjo-Riitta & Lichtermann, Dirk, 2005. "Self-employment and risk aversion--evidence from psychological test data," Labour Economics, Elsevier, vol. 12(5), pages 649-659, October.
    49. Molly Dahl & Thomas DeLeire & Jonathan A. Schwabish, 2011. "Estimates of Year-to-Year Volatility in Earnings and in Household Incomes from Administrative, Survey, and Matched Data," Journal of Human Resources, University of Wisconsin Press, vol. 46(4), pages 750-774.
    50. Barnea, Amir & Cronqvist, Henrik & Siegel, Stephan, 2010. "Nature or nurture: What determines investor behavior?," Journal of Financial Economics, Elsevier, vol. 98(3), pages 583-604, December.
    51. Gouskova, Elena & Chiteji, Ngina & Stafford, Frank, 2010. "Estimating the intergenerational persistence of lifetime earnings with life course matching: Evidence from the PSID," Labour Economics, Elsevier, vol. 17(3), pages 592-597, June.
    52. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
    53. Hartog, Joop & Vijverberg, Wim P.M., 2007. "On compensation for risk aversion and skewness affection in wages," Labour Economics, Elsevier, vol. 14(6), pages 938-956, December.
    54. Luc Arrondel, 2013. "Are “daddy’s boys” just as rich as daddy? The transmission of values between generations," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(4), pages 439-471, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bodo Knoll & Nadine Riedel & Eva Schlenker, 2017. "He's a Chip Off the Old Block — The Persistence of Occupational Choices Across Generations," LABOUR, CEIS, vol. 31(2), pages 174-203, June.
    2. repec:eee:eecrev:v:97:y:2017:i:c:p:1-25 is not listed on IDEAS
    3. Andreas Kuhn & Stefan C. Wolter, 2018. "The Strength of Gender Norms and Gender-Stereotypical Occupational Aspirations Among Adolescents," Economics of Education Working Paper Series 0151, University of Zurich, Department of Business Administration (IBW).
    4. Fossen, Frank M. & Glocker, Daniela, 2017. "Stated and revealed heterogeneous risk preferences in educational choice," European Economic Review, Elsevier, vol. 97(C), pages 1-25.
    5. Heinrich, Timo & Shachat, Jason, 2018. "The development of risk aversion and prudence in Chinese children and adolescents," MPRA Paper 86456, University Library of Munich, Germany.
    6. Gonzalo Olcina & Elena Mas Tur & Luisa Escriche, 2017. "Entrepreneurs, culture and productivity," Discussion Papers in Economic Behaviour 0117, University of Valencia, ERI-CES.
    7. repec:eee:labeco:v:51:y:2018:i:c:p:108-120 is not listed on IDEAS
    8. Ferdinand M. Vieider & Mathieu Lefebvre & Ranoua Bouchouicha & Thorsten Chmura & Rustamdjan Hakimov & Michal Krawczyk & Peter Martinsson, 2015. "Common Components Of Risk And Uncertainty Attitudes Across Contexts And Domains: Evidence From 30 Countries," Journal of the European Economic Association, European Economic Association, vol. 13(3), pages 421-452, June.
    9. repec:kap:reveho:v:16:y:2018:i:4:d:10.1007_s11150-017-9374-0 is not listed on IDEAS
    10. J. Ignacio Gimenez-Nadal & José Alberto Molina & Yu Zhu, 2018. "Intergenerational mobility of housework time in the United Kingdom," Review of Economics of the Household, Springer, vol. 16(4), pages 911-937, December.
    11. Necker, Sarah & Voskort, Andrea, 2014. "Politics and parents — Intergenerational transmission of values after a regime shift," European Journal of Political Economy, Elsevier, vol. 36(C), pages 177-194.
    12. Philipp Huebler & Andreas Kucher, 2016. "Ashes to ashes, time to time - Parental time discounting and its role in the intergenerational transmission of smoking," Discussion Paper Series 326, Universitaet Augsburg, Institute for Economics.
    13. Vanessa Hartlaub & Thorsten Schneider, 2012. "Educational Choice and Risk Aversion: How Important Is Structural vs. Individual Risk Aversion?," SOEPpapers on Multidisciplinary Panel Data Research 433, DIW Berlin, The German Socio-Economic Panel (SOEP).
    14. Gianluca Femminis, 2019. "Risk aversion heterogeneity and the investment–uncertainty relationship," Journal of Economics, Springer, vol. 127(3), pages 223-264, August.
    15. Vieider, Ferdinand M. & Chmura, Thorsten & Martinsson, Peter, 2012. "Risk attitudes, development, and growth: Macroeconomic evidence from experiments in 30 countries," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2012-401, WZB Berlin Social Science Center.
    16. Argaw, Bethlehem A. & Maier, Michael F. & Skriabikova, Olga J., 2017. "Risk attitudes, job mobility and subsequent wage growth during the early career," ZEW Discussion Papers 17-023, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    Keywords

    Risk preferences; Intergenerational transmission; Occupational choice;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:65:y:2014:i:c:p:66-89. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/eer .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.