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Do Parents Risk Aversion and Wealth Explalin Secondary School Choice?

  • Marco Leonardi

    ()

    (University of Milan, IZA)

Using data in which individual risk aversion is measured from answers to a lottery question, I investigate if (and to what extent) parents’ risk aversion and wealth can explain secondary schooling choices of young Italians. The question is relevant because the type of secondary school is likely to affect accession to college and the future performance in the labor market. I find that risk aversion has no effect on the choice of secondary school while family wealth is significantly positively associated to the choice of “Liceo”. OLS and IV estimates show that parents’ wealth has a significantly larger effect in liquidity constrained families (4% of the sample). This finding points to the necessity of introducing schooling grants at lower levels of schooling.

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File URL: ftp://ftp.gde.unibocconi.it/gde_articles/2007/GDE_V66_N2_P177-206.pdf
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Article provided by GDE (Giornale degli Economisti e Annali di Economia), Bocconi University in its journal Giornale degli Economisti e Annali di Economia.

Volume (Year): 66 (2007)
Issue (Month): 2 (July)
Pages: 177-206

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Handle: RePEc:gde:journl:gde_v66_n2_p177-206
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  1. 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, Elsevier.
  2. Christian Belzil & Marco Leonardi, 2006. "Can Risk Aversion Explain Schooling Attainments? Evidence From Italy," Working Papers 0607, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  3. Luca Flabbi, 2001. "La scelta della scuola secondaria in Italia," Rivista di Politica Economica, SIPI Spa, vol. 91(6), pages 85-114, July-Augu.
  4. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," NBER Working Papers 9055, National Bureau of Economic Research, Inc.
  5. Gould, Eric D & Moav, Omer & Weinberg, Bruce A, 2001. " Precautionary Demand for Education, Inequality, and Technological Progress," Journal of Economic Growth, Springer, vol. 6(4), pages 285-315, December.
  6. Brunello, Giorgio, 2002. "Absolute risk aversion and the returns to education," Economics of Education Review, Elsevier, vol. 21(6), pages 635-640, December.
  7. Luigi Guiso & Monica Paiella, 2005. "The Role Of Risk Aversion In Predicting Individual Behavior," Temi di discussione (Economic working papers) 546, Bank of Italy, Economic Research and International Relations Area.
  8. Cunha, Flavio & Heckman, James J. & Navarro, Salvador, 2004. "Separating Uncertainty from Heterogeneity in Life Cycle Earnings," IZA Discussion Papers 1437, Institute for the Study of Labor (IZA).
  9. Ignacio Palacios-Huerta, 2001. "An Empirical Analysis of the Risk Properties of Human Capital Returns," Working Papers 2001-10, Brown University, Department of Economics.
  10. Harmon, Colm & Hogan, Vincent & Walker, Ian, 2003. "Dispersion in the economic return to schooling," Labour Economics, Elsevier, vol. 10(2), pages 205-214, April.
  11. Federico Cingano & Piero Cipollone, 2007. "University drop-out. The case of Italy," Temi di discussione (Economic working papers) 626, Bank of Italy, Economic Research and International Relations Area.
  12. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-53, April.
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