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The Relationship between Unemployment and Risk-Aversion

  • Diaz-Serrano, Luis

    ()

    (Universitat Rovira i Virgili)

  • O'Neill, Donal

    ()

    (National University of Ireland, Maynooth)

In this paper we use a direct measure of individual risk-aversion to examine the relationship between risk-aversion and unemployment. The traditional search model predicts that more risk-averse individuals have lower reservation wages and thus are less likely to be observed in unemployment. Our findings, however, do not support this prediction: on the contrary our data suggest that more risk-averse individuals are more likely to be unemployed.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1214.

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Length: 14 pages
Date of creation: Jul 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1214
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  1. Guiso, Luigi & Paiella, Monica, 2001. "Risk Aversion, Wealth and Background Risk," CEPR Discussion Papers 2728, C.E.P.R. Discussion Papers.
  2. Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
  3. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-68, September.
  4. Nachman, David C., 1975. "Risk aversion, impatience, and optimal timing decisions," Journal of Economic Theory, Elsevier, vol. 11(2), pages 196-246, October.
  5. 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 241-53, April.
  6. 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 626-53, October.
  7. Feinberg, Robert M, 1977. "Risk Aversion, Risk, and the Duration of Unemployment," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 264-71, August.
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