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You get what you pay for: Incentives and Selection in the Education System

  • Dohmen Thomas
  • Falk Armin


We analyse worker self-selection with a special focus on teachers. The point of the paper is that worker composition is generally endogenous, due to worker selfselection. In a first step we analyse lab experimental data to provide causal evidence on particular sorting patterns. This evidence sets the stage for our field data analysis, which focuses specifically on selection patterns of teachers. We find that teachers are more risk averse than employees in other professions, which indicates that relatively risk averse individuals sort into teaching occupations under the current system. Using survey measures on trust and reciprocity we also find that teachers trust more and are less negatively reciprocal than other employees. Finally, we establish differences in personality based on the Big Five concept.

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Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 011.

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Date of creation: 2010
Date of revision:
Handle: RePEc:unm:umamet:2010011
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  1. Jeff Dominitz & Charles F. Manski, 1996. "Eliciting Student Expectations of the Returns to Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 1-26.
  2. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
  3. Thomas Dohmen & Armin Falk, 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender," American Economic Review, American Economic Association, vol. 101(2), pages 556-90, April.
  4. Bonin, Holger & Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2007. "Cross-sectional earnings risk and occupational sorting: The role of risk attitudes," Munich Reprints in Economics 20204, University of Munich, Department of Economics.
  5. Dohmen, Thomas & Falk, Armin & Huffman, David B. & Sunde, Uwe, 2006. "The Intergenerational Transmission of Risk and Trust Attitudes," IZA Discussion Papers 2380, Institute for the Study of Labor (IZA).
  6. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2009. "Homo Reciprocans: Survey Evidence on Behavioural Outcomes," Economic Journal, Royal Economic Society, vol. 119(536), pages 592-612, 03.
  7. Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA).
  8. Grund, Christian & Sliwka, Dirk, 2002. "Envy and Compassion in Tournaments," IZA Discussion Papers 647, Institute for the Study of Labor (IZA).
  9. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Working Papers 200827, Geary Institute, University College Dublin.
  10. Joop Hartog & Luis Diaz-Serrano, 2004. "Earnings Risk And Demand For Higher Education: A Cross-Section Test For Spain," Economics, Finance and Accounting Department Working Paper Series n1370804, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  11. Hause, John C, 1974. "The Risk Element in Occupational and Educational Choices: Comment," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 803-07, July/Aug..
  12. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2008. "Representative trust and reciprocity: Prevalence and determenants," Munich Reprints in Economics 20058, University of Munich, Department of Economics.
  13. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, December.
  14. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-63, December.
  15. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  16. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  17. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  18. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  19. Lalith Munasinghe & Nachum Sicherman, 2006. "Why Do Dancers Smoke? Smoking, Time Preference, and Wage Dynamics," Eastern Economic Journal, Eastern Economic Association, vol. 32(4), pages 595-616, Fall.
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