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Do Students Expect Compensation for Wage Risk?

  • Jürg Schweri


    (EHB Schweiz)

  • Stefan C. Wolter


    (Institute of Economics, University of Berne)

  • Joop Hartog

We use a unique data set about the future wage distribution that Swiss students expect for themselves ex-ante, suggesting that students use very little private information about their wage prospects. Expectations appear much more anchored to perceptions of actual contemporaneous market data. Students even anticipate that the market provides compensation for risk, as has been established with Risk Augmented Mincer earnings equations estimated on market data: higher wage risk for educational groups is associated with higher mean wages. With observations on risk as expected by students we find compensation at similar elasticities as observed in market data. The results are robust to different specifications and estimation models.

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Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Economics of Education Working Paper Series with number 0011.

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Length: 40 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:iso:educat:0011
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