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Risk Aversion and College Subject

  • Paolo Buonanno


  • Dario Pozzoli


We investigate whether individual attitudes toward risk may explain why, though there exist huge di erences in the employment returns of graduates by fields of study, the most demanded subjects by the economy are less frequently chosen. The econometric methodology is based on a three step procedure which controls for selectivity bias in the rst stage (Heckman, 1979; Lee, 1983; Trost and Lee, 1984). Using a large data set from a survey on the 2001 Italian high school graduates, the main results indicate that students take into account the a priori probability of unsuccess when choosing the college subject. Moreover, students coming from a lower socio-economic background display more risk aversion.

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Paper provided by University of Bergamo, Department of Economics in its series Working Papers (-2012) with number 0707.

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Length: 21 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:brg:wpaper:0707
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  1. Belzil, Christian & Leonardi, Marco, 2007. "Risk Aversion and Schooling Decisions," IZA Discussion Papers 2994, Institute for the Study of Labor (IZA).
  2. Joop Hartog & Hans Van Ophem & Simona Maria Bajdechi, 2007. "Simulating the Risk of Investment in Human Capital," Education Economics, Taylor & Francis Journals, vol. 15(3), pages 259-275.
  3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  4. 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.
  5. David N. Figlio & Marianne E. Page, 2000. "School Choice and the Distributional Effects of Ability Tracking: Does Separation Increase Equality?," NBER Working Papers 8055, National Bureau of Economic Research, Inc.
  6. Christian Belzil & Marco Leonardi, 2007. "Can Risk Aversion Explain Schooling Attainments?: evidence from Italy," Post-Print halshs-00201351, HAL.
  7. Di Pietro, Giorgio & Cutillo, Andrea, 2008. "Degree flexibility and university drop-out: The Italian experience," Economics of Education Review, Elsevier, vol. 27(5), pages 546-555, October.
  8. Charlotte Christiansen & Juanna Schröter Joensen, 2006. "The Risk-Return Trade-Off in Human Capital Investment," Economics Working Papers 2006-02, School of Economics and Management, University of Aarhus.
  9. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 48-83, January.
  10. Daniele Checchi & Giuseppe Bertola, 2001. "Sorting and private education in Italy," Departmental Working Papers 2001-21, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  11. Trost, Robert P & Lee, Lung-Fei, 1984. "Technical Training and Earnings: A Polychotomous Choice Model with Selectivity," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 151-56, February.
  12. Rochat, Denis & Demeulemeester, Jean-Luc, 2001. "Rational choice under unequal constraints: the example of Belgian higher education," Economics of Education Review, Elsevier, vol. 20(1), pages 15-26, February.
  13. Christian Dustmann, 2004. "Parental background, secondary school track choice, and wages," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 209-230, April.
  14. Robert Haveman & Barbara Wolfe, 1995. "The Determinants of Children's Attainments: A Review of Methods and Findings," Journal of Economic Literature, American Economic Association, vol. 33(4), pages 1829-1878, December.
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