Compensation for Earnings Risk under Worker Heterogeneity
We use two large data sets to estimate the Risk Augmented Mincer equation and test for risk compensation in expected earnings. We replicate earlier findings of a positive premium for risk and a negative premium for skew and add confirmation of the key results if we control for individual ability. We compare risk compensation and risk distributions between some labor market groups and find that immigrants and natives do not differ in risk attitudes, that public sector workers are undercompensated for their risk, and that risk compensation by gender is not fully consistent with higher risk aversion for women. We express concern that a linear compensation model may be too simple.
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Volume (Year): 76 (2010)
Issue (Month): 3 (January)
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- Steven J. Davis & Paul Willen, 2000.
"Occupation-Level Income Shocks and Asset Returns: Their Covariance and Implications for Portfolio Choice,"
NBER Working Papers
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- Steven J. Davis & Paul Willen, 2000. "Occupation-Level Income Shocks and Asset Returns: Their Covariance and Implications for Portfolio Choice," CRSP working papers 523, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Davis, Steven J. & Willen, Paul S., 2013. "Occupation-level income shocks and asset returns: their covariance and implications for portfolio choice," Working Papers 13-9, Federal Reserve Bank of Boston, revised 24 Oct 2013.
- Cunha, Flavio & Heckman, James & Navarro, Salvador, 2004.
"Separating uncertainty from heterogeneity in life cycle earnings,"
Working Paper Series
2005:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
- 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.
- Flavio Cunha & James J. Heckman & Salvador Navarro, 2005. "Separating Uncertainty from Heterogeneity in Life Cycle Earnings," NBER Working Papers 11024, National Bureau of Economic Research, Inc.
- 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).
- Ignacio Palacios-Huerta, 2003.
"An Empirical Analysis of the Risk Properties of Human Capital Returns,"
American Economic Review,
American Economic Association, vol. 93(3), pages 948-964, June.
- Ignacio Palacios-Huerta, 2001. "An Empirical Analysis of the Risk Properties of Human Capital Returns," Working Papers 2001-10, Brown University, Department of Economics.
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