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

  • Dohmen Thomas
  • Falk Armin

    (ROA rm)

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 self-selection. 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, Research Centre for Education and the Labour Market (ROA) in its series ROA Research Memorandum with number 002.

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Date of creation: 2010
Date of revision:
Handle: RePEc:unm:umaror:2010002
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  1. 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.
  2. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
  3. Bonin, Holger & Dohmen, Thomas & Falk, Armin & Huffman, David B. & Sunde, Uwe, 2006. "Cross-sectional Earnings Risk and Occupational Sorting: The Role of Risk Attitudes," IZA Discussion Papers 1930, Institute for the Study of Labor (IZA).
  4. Dohmen, Thomas J & Falk, Armin & Huffman, David & Sunde, Uwe, 2008. "The Intergenerational Transmission of Risk and Trust Attitudes," CEPR Discussion Papers 6844, C.E.P.R. Discussion Papers.
  5. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 312-328, July.
  6. 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.
  7. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2008. "Representative trust and reciprocity: Prevalence and determinants," Munich Reprints in Economics 20057, University of Munich, Department of Economics.
  8. 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.
  9. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
  10. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  11. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2009. "Homo Reciprocans: Survey Evidence on Behavioural Outcomes," Munich Reprints in Economics 20055, University of Munich, Department of Economics.
  12. 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.
  13. Hartog, Joop & Diaz-Serrano, Luis, 2002. "Earnings Risk and Demand for Higher Education: A Cross-Section Test for Spain," IZA Discussion Papers 641, Institute for the Study of Labor (IZA).
  14. Grund, Christian & Sliwka, Dirk, 2002. "Envy and Compassion in Tournaments," IZA Discussion Papers 647, Institute for the Study of Labor (IZA).
  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. 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..
  17. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, July.
  18. 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.
  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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