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Education Choice under Uncertainty

Author

Listed:
  • Hogan, Vincent

    (University College Dublin)

  • Ian Walker

    (University of Warwick)

Abstract

We apply the theory of real options to the problem of education choice when returns to education are uncertain. We show that the length of time spent in school will be an increasing function of the risk associated with education and not just the expected return. This fact has been neglected in much of the empirical literature on education.

Suggested Citation

  • Hogan, Vincent & Ian Walker, 2002. "Education Choice under Uncertainty," Royal Economic Society Annual Conference 2002 103, Royal Economic Society.
  • Handle: RePEc:ecj:ac2002:103
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    Cited by:

    1. Joop Hartog & Luis Díaz-Serrano, 2007. "Earnings risk and demand for higher education: A cross-section test for Spain," Journal of Applied Economics, Universidad del CEMA, vol. 10, pages 1-28, May.
    2. Pedro Martins & Jim Jin, 2010. "Firm-level social returns to education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 539-558, March.
    3. Christiansen, Charlotte & Nielsen, Helena Skyt, 2002. "The Educational Asset Market: A Finance Perspective on Human Capital Investment," Working Papers 02-10, University of Aarhus, Aarhus School of Business, Department of Economics.
    4. Flossmann Anton L. & Pohlmeier Winfried, 2006. "Causal Returns to Education: A Survey on Empirical Evidence for Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(1), pages 6-23, February.
    5. Andini, Corrado & Pereira, Pedro T., 2007. "Full-time Schooling, Part-time Schooling, and Wages: Returns and Risks in Portugal," IZA Discussion Papers 2651, Institute for the Study of Labor (IZA).
    6. Migali, Giuseppe, 2006. "Funding Higher Education and Wage Uncertainty: Income Contingent Loan Versus Mortgate Loan," The Warwick Economics Research Paper Series (TWERPS) 740, University of Warwick, Department of Economics.
    7. Jacobs, Bas, 2007. "Real options and human capital investment," Labour Economics, Elsevier, vol. 14(6), pages 913-925, December.
    8. Saïd Hanchane & David Touahri, 2004. "Human capital accumulation over the life cycle under multiple sources of uncertainty," Working Papers halshs-00010248, HAL.
    9. 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.
    10. Hogan, Vincent & Walker, Ian, 2007. "Education choice under uncertainty: Implications for public policy," Labour Economics, Elsevier, vol. 14(6), pages 894-912, December.
    11. Santiago Budria, 2010. "Schooling and the distribution of wages in the European private and public sectors," Applied Economics, Taylor & Francis Journals, vol. 42(8), pages 1045-1054.
    12. Beladi, Hamid & Sinha, Chaitali & Kar, Saibal, 2016. "To educate or not to educate: Impact of public policies in developing countries," Economic Modelling, Elsevier, vol. 56(C), pages 94-101.
    13. Diaz-Serrano, Luis & Hartog, Joop, 2004. "Is There a Risk-Return Trade-Off across Occupations? Evidence from Spain," IZA Discussion Papers 1355, Institute for the Study of Labor (IZA).
    14. Migali, Giuseppe, 2012. "Funding higher education and wage uncertainty: Income contingent loan versus mortgage loan," Economics of Education Review, Elsevier, vol. 31(6), pages 871-889.
    15. Luis Diaz-Serrano & J. Hartog, 2004. "Is there a Risk-Return Trade-off across Occupations? Evidence from Spain," Economics, Finance and Accounting Department Working Paper Series n1441004, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    16. Vincent Hogan & Roberto Rigobon, 2002. "Using Heteroscedasticity to Estimate the Returns to Education," NBER Working Papers 9145, National Bureau of Economic Research, Inc.

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