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Risk aversion and schooling decisions

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  • Christian Belzil

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique, ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique)

  • Marco Leonardi

    (Università degli studi di Milano [Milano])

Abstract

Using unique Italian panel data in which individual differences in attitudes toward risk are measurable (from a lottery pricing question), we investigate the effect of the individual specific time invariant risk aversion factor on the probability of entering higher education. Apart from the risk aversion factor, absolute risk aversion depends on various state variables (wealth, liquidity constraints, back- ground risk) and is assumed to be measured with nonclassical error. We also take into account the endogeneity of the response to the risk aversion question, as well as potential non-classical measurement error in wealth. All model specifications point out to the fact that individual specific risk aversion acts as a deterrent to higher education investment.

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  • Christian Belzil & Marco Leonardi, 2009. "Risk aversion and schooling decisions," Working Papers hal-00411099, HAL.
  • Handle: RePEc:hal:wpaper:hal-00411099
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00411099
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    References listed on IDEAS

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    Cited by:

    1. Schweri, Juerg & Hartog, Joop & Wolter, Stefan C., 2011. "Do students expect compensation for wage risk?," Economics of Education Review, Elsevier, vol. 30(2), pages 215-227, April.
    2. Dasgupta, Utteeyo & Gangadharan, Lata & Maitra, Pushkar & Mani, Subha & Subramanian, Samyukta, 2015. "Choosing to be trained: Do behavioral traits matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 110(C), pages 145-159.
    3. Nathan Kettlewell, 2019. "Utilization and Selection in an Ancillaries Health Insurance Market," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 86(4), pages 989-1017, December.
    4. Mazza, Jacopo & van Ophem, Hans & Hartog, Joop, 2013. "Unobserved heterogeneity and risk in wage variance: Does more schooling reduce earnings risk?," Labour Economics, Elsevier, vol. 24(C), pages 323-338.
    5. Dasgupta, Utteeyo & Gangadharan, Lata & Maitra, Pushkar & Mani, Subha & Subramanian, Samyukta, 2011. "Selection into skill accumulation: evidence using observational and experimental data," MPRA Paper 32383, University Library of Munich, Germany.
    6. Fabian T. Pfeffer & Martin Hällsten, 2012. "Mobility Regimes and Parental Wealth: The United States, Germany, and Sweden in Comparison," SOEPpapers on Multidisciplinary Panel Data Research 500, DIW Berlin, The German Socio-Economic Panel (SOEP).
    7. Natasa Bilkic & Thomas Gries & Margarethe Pilichowski, 2009. "Stay in School or Start Working? - The Human Capital Investment Decision under Uncertainty and Irreversibility," CESifo Working Paper Series 2825, CESifo Group Munich.
    8. Brodaty, Thomas & Gary-Bobo, Robert J. & Prieto, Ana, 2014. "Do risk aversion and wages explain educational choices?," Journal of Public Economics, Elsevier, vol. 117(C), pages 125-148.
    9. Belzil, Christian, 2007. "Subjective Beliefs and Schooling Decisions," IZA Discussion Papers 2820, Institute of Labor Economics (IZA).
    10. Paolo Buonanno & Dario Pozzoli, 2007. "Risk Aversion and College Subject," Working Papers (-2012) 0707, University of Bergamo, Department of Economics.
    11. Bilkic, N. & Gries, T. & Pilichowski, M., 2012. "Stay in school or start working? — The human capital investment decision under uncertainty and irreversibility," Labour Economics, Elsevier, vol. 19(5), pages 706-717.
    12. Jonathan G. Kimmes & Stuart J. Heckman, 2017. "Parenting Styles and College Enrollment: A Path Analysis of Risky Human Capital Decisions," Journal of Family and Economic Issues, Springer, vol. 38(4), pages 614-627, December.
    13. Plamen Nikolov, 2018. "Time Delay and Investment Decisions: Evidence from An Experiment in Tanzania," Economics Bulletin, AccessEcon, vol. 38(2), pages 1124-1137.

    More about this item

    Keywords

    Risk Aversion; Ex-ante risk; schooling; subjective beliefs; dynamic discrete choices;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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