IDEAS home Printed from https://ideas.repec.org/a/ucp/jlabec/v14y1996i4p626-53.html
   My bibliography  Save this article

An Empirical Analysis of Risk Aversion and Income Growth*

* This paper has been replicated

Author

Listed:
  • Shaw, Kathryn L

Abstract

Risk aversion enters many theoretical models of human capital investment, but attitudes toward risk have not been incorporated in empirical models of human capital investment. This article develops a model of the joint investment in financial wealth and human wealth to show that human capital investment is an inverse function of the degree of relative risk aversion. Using data from the Survey of Consumer Finances, the author finds that wage growth is positively correlated with preferences for risk taking. More educated individuals are also more likely to be risktakers, thus risk taking explains a portion of the returns to education. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • 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.
    • Handle: RePEc:ucp:jlabec:v:14:y:1996:i:4:p:626-53
    DOI: 10.1086/209825
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/209825
    File Function: full text
    Download Restriction: Access to full text is restricted to subscribers. See http://www.journals.uchicago.edu/JOLE for details.
    File URL: https://libkey.io/10.1086/209825?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    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. Kathryn L. Shaw, 1984. "A Formulation of the Earnings Function Using the Concept of Occupational Investment," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 319-340.
    2. Brown, James N & Rosen, Harvey S, 1987. "Taxation, Wage Variation, and Job Choice," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 430-451, October.
    3. anonymous, 1971. "Monetary aggregates and recent economic trends," Review, Federal Reserve Bank of St. Louis, vol. 53(Apr), pages 2-9.
    4. anonymous, 1971. "The economy: a moderate recovery," Review, Federal Reserve Bank of St. Louis, vol. 53(May), pages 2-7.
    5. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-273, April.
    6. John M. Abowd & Orley C. Ashenfelter, 1981. "Anticipated Unemployment, Temporary Layoffs, and Compensating Wage Differentials," NBER Chapters, in: Studies in Labor Markets, pages 141-170, National Bureau of Economic Research, Inc.
    7. N/A, 1971. "The Economic Situation: Chapter I. the Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 58(1), pages 4-15, November.
    8. Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June.
    9. Schwartz, Aba, 1976. "Migration, Age, and Education," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 701-719, August.
    10. Rosen, Sherwin, 2007. "Studies in Labor Markets," National Bureau of Economic Research Books, University of Chicago Press, number 9780226726304, September.
    11. Liberman, Joseph, 1980. "Human Capital and the Financial Capital Market," The Journal of Business, University of Chicago Press, vol. 53(2), pages 165-191, April.
    12. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    13. Williams, Joseph T, 1979. "Uncertainty and the Accumulation of Human Capital over the Life Cycle," The Journal of Business, University of Chicago Press, vol. 52(4), pages 521-548, October.
    14. William R. Johnson, 1978. "A Theory of Job Shopping," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(2), pages 261-277.
    15. N/A, 1971. "Chapter II. The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 58(1), pages 16-33, November.
    16. N/A, 1971. "Chapter II: The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 57(1), pages 21-34, August.
    17. Weiss, Yoram, 1972. "The Risk Element in Occupational and Educational Choices," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1203-1213, Nov.-Dec..
    18. Griliches, Zvi, 1974. "Errors in Variables and Other Unobservables," Econometrica, Econometric Society, vol. 42(6), pages 971-998, November.
    19. N/A, 1971. "The Economic Situation," National Institute Economic Review, National Institute of Economic and Social Research, vol. 56(1), pages 4-21, May.
    20. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-229, April.
    21. White, Halbert & Domowitz, Ian, 1984. "Nonlinear Regression with Dependent Observations," Econometrica, Econometric Society, vol. 52(1), pages 143-161, January.
    22. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
    23. N/A, 1971. "The Economic Situation," National Institute Economic Review, National Institute of Economic and Social Research, vol. 56(1), pages 22-35, May.
    24. Hause, John C, 1974. "The Risk Element in Occupational and Educational Choices: Comment," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 803-807, July/Aug..
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lucas, Robert E, Jr, 1996. "Nobel Lecture: Monetary Neutrality," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 661-682, August.
    2. Lucio Bertoli-Barsotti, 2001. "Some remarks on Lorenz ordering-preserving functionals," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 10(1), pages 99-112, January.
    3. Park, Ki Seong, 1996. "Economic Growth and Multiskilled Workers in Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 254-285, April.
    4. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    5. Joseph G. Altonji & Nicolas Williams, 1992. "The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth," NBER Working Papers 4133, National Bureau of Economic Research, Inc.
    6. Ghosh, Suman, 2007. "Job mobility and careers in firms," Labour Economics, Elsevier, vol. 14(3), pages 603-621, June.
    7. Mengistae, Taye, 1999. "The relative effects of skill formation and job matching on wage growth in Ethiopia," Policy Research Working Paper Series 2104, The World Bank.
    8. Florian S. Peters & Alexander F. Wagner, 2014. "The Executive Turnover Risk Premium," Journal of Finance, American Finance Association, vol. 69(4), pages 1529-1563, August.
    9. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    10. Margarita Katsimi, 2008. "Training, Job Security And Incentive Wages," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(1), pages 67-78, February.
    11. William J. Carrington, 2015. "Do We Know Why Earnings Fall with Job Displacement? Working Paper: 2015-01," Working Papers 49908, Congressional Budget Office.
    12. Timothy E. Dore & Rebecca Zarutskie, 2017. "Firm Leverage, Labor Market Size, and Employee Pay," Finance and Economics Discussion Series 2017-078, Board of Governors of the Federal Reserve System (U.S.).
    13. Wayne Simpson, 2000. "Intermittent work activity and earnings," Applied Economics, Taylor & Francis Journals, vol. 32(14), pages 1777-1786.
    14. Joseph G. Altonji & Nicolas Williams, 2005. "Do Wages Rise with Job Seniority? A Reassessment," ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
    15. Sarah Brown & Aurora Ortiz‐Nuñez & Karl Taylor, 2012. "Parental Risk Attitudes and Children's Academic Test Scores: Evidence from the US P anel S tudy of I ncome D ynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(1), pages 47-70, February.
    16. Sarah Brown & Karl Taylor, 2006. "Education, Risk Preference and Wages," Working Papers 2006002, The University of Sheffield, Department of Economics, revised Feb 2006.
    17. repec:eee:labchp:v:1:y:1986:i:c:p:641-692 is not listed on IDEAS
    18. Merja Kauhanen & Sami Napari, 2010. "Wage Growth and Mobility Between and Within Firms by Gender and Education," Working Papers 260, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    19. Jeffrey J. Yankow, 2003. "Migration, Job Change, and Wage Growth: A New Perspective on the Pecuniary Return to Geographic Mobility," Journal of Regional Science, Wiley Blackwell, vol. 43(3), pages 483-516, August.
    20. Hagen, Tobias, 2001. "Do temporary workers receive risk-premiums? Assessing the wage effects of fixed-term contracts in West-Germany by matching estimators compared with parametric apporaches," ZEW Discussion Papers 01-71, ZEW - Leibniz Centre for European Economic Research.
    21. Guillaume Destré, 2003. "Fonctions de gains et diffusion du savoir : une estimation sur données françaises appariées," Économie et Prévision, Programme National Persée, vol. 158(2), pages 89-104.
    22. Yamaguchi, Shintaro, 2010. "The effect of match quality and specific experience on career decisions and wage growth," Labour Economics, Elsevier, vol. 17(2), pages 407-423, April.
    23. Guido Matias Cortes & Giovanni Gallipoli, 2018. "The Costs of Occupational Mobility: An Aggregate Analysis," Journal of the European Economic Association, European Economic Association, vol. 16(2), pages 275-315.

    Replication

    This item has been replicated by:
  • Santi Budria & Luis Diaz-Serrano & Ada Ferrer-i-Carbonell & Joop Hartog, 2013. "Risk attitude and wage growth: replicating Shaw (1996)," Empirical Economics, Springer, vol. 44(2), pages 981-1004, April.

    • More about this item

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. An Empirical Analysis of Risk Aversion and Income Growth (JLE 1996) in ReplicationWiki

    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:ucp:jlabec:v:14:y:1996:i:4:p:626-53. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JOLE .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.