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Risk Attitudes and Wage Growth: Replication and Reconstruction

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Listed:
  • Santi Budria
  • Luis Diaz-Serrano
  • Ada Ferrer-i-Carbonell
  • Joop Hartog

Abstract

We replicate Shaw (1996) who found that individual wage growth is higher for individuals with greater preference for risk taking. Expanding her dataset with more American observations and data for Germany, Spain and Italy, we find mixed support for the earlier results. We present and estimate a new model and find that in particular the wage level is sensitive to attitudes towards risk taking.

Suggested Citation

  • Santi Budria & Luis Diaz-Serrano & Ada Ferrer-i-Carbonell & Joop Hartog, 2009. "Risk Attitudes and Wage Growth: Replication and Reconstruction," SOEPpapers on Multidisciplinary Panel Data Research 192, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp192
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    References listed on IDEAS

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    1. Luis Diaz‐Serrano & Joop Hartog & Helena Skyt Nielsen, 2008. "Compensating Wage Differentials for Schooling Risk in Denmark," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(4), pages 711-731, December.
    2. 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.
    3. Belzil, Christian & Leonardi, Marco, 2007. "Can risk aversion explain schooling attainments? Evidence from Italy," Labour Economics, Elsevier, vol. 14(6), pages 957-970, December.
    4. Arthur B. Kennickell & Martha Starr‐Mccluer, 1997. "Household Saving And Portfolio Change: Evidence From The 1983–89 Scf Panel," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(4), pages 381-399, December.
    5. Santiago Budría & Javier Díaz-Giménez, 2007. "Economic inequality in Spain: the european community household panel dataset," Spanish Economic Review, Springer;Spanish Economic Association, vol. 9(1), pages 1-38, March.
    6. Luigi Guiso & Monica Paiella, 2008. "Risk Aversion, Wealth, and Background Risk," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1109-1150, December.
    7. 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.
    8. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," Discussion Papers of DIW Berlin 511, DIW Berlin, German Institute for Economic Research.
    9. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    10. Terza, Joseph V., 1987. "Estimating linear models with ordinal qualitative regressors," Journal of Econometrics, Elsevier, vol. 34(3), pages 275-291, March.
    11. Diaz-Serrano, Luis, 2005. "On the negative relationship between labor income uncertainty and homeownership: Risk-aversion vs. credit constraints," Journal of Housing Economics, Elsevier, vol. 14(2), pages 109-126, June.
    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 241-253, April.
    13. 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.
    14. Kennickell, Arthur B & Starr-McCluer, Martha, 1997. "Household Saving and Portfolio Change: Evidence from the 1983-89 SCF Panel," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(4), pages 381-399, December.
    15. 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.
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    Cited by:

    1. Ingo E. Isphording, 2010. "Risky Business – The Role of Individual Risk Attitudes in Occupational Choice," Ruhr Economic Papers 0187, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. Isphording, Ingo E., 2010. "Risky Business – The Role of Individual Risk Attitudes in Occupational Choice," Ruhr Economic Papers 187, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. repec:zbw:rwirep:0187 is not listed on IDEAS
    4. Sepahvand, Mohammad & Shahbazian, Roujman, 2017. "Individual’s Risk Attitudes in sub-Saharan Africa: Determinants and Reliability of Self-reported Risk in Burkina Faso," Working Paper Series 2017:11, Uppsala University, Department of Economics.

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    More about this item

    Keywords

    wage growth; risk; post-school investment;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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