IDEAS home Printed from https://ideas.repec.org/p/unm/umaror/2017002.html
   My bibliography  Save this paper

Only the brave? Risk and time preferences of decision makers and firms' investment in worker training

Author

Listed:
  • Jansen, Anika
  • Pfeifer, Harald
  • Raecke, Julia

Abstract

In this paper, we study the relation between decision makers’ preferences and training investments of their firms. First, we develop a theoretical framework, which takes the possibility into account that individual preferences of decision makers may influence firm behavior with respect to training. We then develop and test the hypothesis that the willingness to take risks or the preference for future profits of decision makers is positively related and procrastination negatively related to firms’ investment in worker training. Using unique firm-level data, including both person-level preference measures and firm-level information about training costs, we find empirical support for our hypothesis. Training investment is higher in firms with risk-inclined decision makers and lower in firms with procrastinating decision makers. The preference for future profits is relevant for training participation and the number of trained workers, but not for the training investment per worker. The results imply that firms have scope to adjust their profit-maximizing strategies by taking the individual preferences of their decision makers into account.

Suggested Citation

  • Jansen, Anika & Pfeifer, Harald & Raecke, Julia, 2017. "Only the brave? Risk and time preferences of decision makers and firms' investment in worker training," ROA Research Memorandum 002, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    • Handle: RePEc:unm:umaror:2017002
    DOI: 10.26481/umaror.2017002
    as

    Download full text from publisher

    File URL: https://cris.maastrichtuniversity.nl/ws/files/8867920/ROA_RM_2017_2.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.26481/umaror.2017002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Antonio Filippin & Paolo Crosetto, 2016. "A Reconsideration of Gender Differences in Risk Attitudes," Management Science, INFORMS, vol. 62(11), pages 3138-3160, November.
    2. Måns Söderbom & Catherine Pattillo, 2000. "Managerial Risk Attitudes and Firm Performance in Ghanaian Manufacturing: an Empirical Analysis Based on Experimental Data," Economics Series Working Papers WPS/2000-17, University of Oxford, Department of Economics.
    3. Bart H.H. Golsteyn & Hans Grönqvist & Lena Lindahl, 2014. "Adolescent Time Preferences Predict Lifetime Outcomes," Economic Journal, Royal Economic Society, vol. 124(580), pages 739-761, November.
    4. Reuben, Ernesto & Sapienza, Paola & Zingales, Luigi, 2015. "Procrastination and impatience," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 63-76.
    5. 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, March.
    6. Cameron,A. Colin & Trivedi,Pravin K., 2013. "Regression Analysis of Count Data," Cambridge Books, Cambridge University Press, number 9781107667273, May.
    7. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    8. repec:taf:applec:45:y:2013:i:18:p:2587-2601 is not listed on IDEAS
    9. Didier Fouarge & Trudie Schils & Andries de Grip, 2013. "Why do low-educated workers invest less in further training?," Applied Economics, Taylor & Francis Journals, vol. 45(18), pages 2587-2601, June.
    10. Andries De Grip & Jan Sauermann, 2012. "The Effects of Training on Own and Co‐worker Productivity: Evidence from a Field Experiment," Economic Journal, Royal Economic Society, vol. 122(560), pages 376-399, May.
    11. Bonin, Holger & Dohmen, Thomas & Falk, Armin & Huffman, David & Sunde, Uwe, 2007. "Cross-sectional earnings risk and occupational sorting: The role of risk attitudes," Labour Economics, Elsevier, vol. 14(6), pages 926-937, December.
    12. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    13. Fouarge, Didier & Kriechel, Ben & Dohmen, Thomas, 2014. "Occupational sorting of school graduates: The role of economic preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 335-351.
    14. Quang Nguyen & Colin Camerer & Tomomi Tanaka, 2010. "Risk and Time Preferences Linking Experimental and Household Data from Vietnam," Post-Print halshs-00547090, HAL.
    15. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, May.
    16. David A. Jaeger & Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Holger Bonin, 2010. "Direct Evidence on Risk Attitudes and Migration," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 684-689, August.
    17. Luigi Guiso & Monica Paiella, 2008. "Risk Aversion, Wealth, and Background Risk," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1109-1150, December.
    18. 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).
    19. Marco Caliendo & Frank Fossen & Alexander Kritikos, 2014. "Personality characteristics and the decisions to become and stay self-employed," Small Business Economics, Springer, vol. 42(4), pages 787-814, April.
    20. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2006. "Managerial incentives and risk-taking," Journal of Financial Economics, Elsevier, vol. 79(2), pages 431-468, February.
    21. Marco Caliendo & Frank Fossen & Alexander Kritikos, 2009. "Risk attitudes of nascent entrepreneurs–new evidence from an experimentally validated survey," Small Business Economics, Springer, vol. 32(2), pages 153-167, February.
    22. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    23. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1169-1208.
    24. Kapteyn, Arie & Teppa, Federica, 2011. "Subjective measures of risk aversion, fixed costs, and portfolio choice," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 564-580, August.
    25. Brachert, Matthias & Hyll, Walter, 2014. "On the Stability of Preferences: Repercussions of Entrepreneurship on Risk Attitudes," IWH Discussion Papers 5/2014, Halle Institute for Economic Research (IWH).
    26. Muehlemann, Samuel & Wolter, Stefan C., 2011. "Firm-sponsored training and poaching externalities in regional labor markets," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 560-570.
    27. repec:ecj:econjl:v:122:y:2012:i::p:376-399 is not listed on IDEAS
    28. Antonio Filippin, 2022. "Gender differences in risk attitudes," IZA World of Labor, Institute of Labor Economics (IZA), pages 100-100, October.
    29. Skriabikova, Olga J. & Dohmen, Thomas & Kriechel, Ben, 2014. "New evidence on the relationship between risk attitudes and self-employment," Labour Economics, Elsevier, vol. 30(C), pages 176-184.
    30. Cucculelli, Marco & Ermini, Barbara, 2013. "Risk attitude, product innovation, and firm growth. Evidence from Italian manufacturing firms," Economics Letters, Elsevier, vol. 118(2), pages 275-279.
    31. David M. Bishai, 2004. "Does time preference change with age?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 583-602, December.
    32. Graham, John R. & Harvey, Campbell R. & Puri, Manju, 2013. "Managerial attitudes and corporate actions," Journal of Financial Economics, Elsevier, vol. 109(1), pages 103-121.
    33. Mark Armstrong & Steffen Huck, 2011. "Behavioral Economics as Applied to Firms: A Primer," Antitrust Chronicle, Competition Policy International, vol. 1.
    34. Catherine Pattillo & Måns Söderbom, 2000. "Managerial Risk Attitudes and Firm Performance in Ghanaian Manufacturing: an Empirical Analysis Based on Experimental Data," CSAE Working Paper Series 2000-17, Centre for the Study of African Economies, University of Oxford.
    35. Chuang, Yating & Schechter, Laura, 2015. "Stability of experimental and survey measures of risk, time, and social preferences: A review and some new results," Journal of Development Economics, Elsevier, vol. 117(C), pages 151-170.
    36. Sabater-Grande, Gerardo & Georgantzis, Nikolaos, 2002. "Accounting for risk aversion in repeated prisoners' dilemma games: an experimental test," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 37-50, May.
    37. 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 950-963, December.
    38. Tomomi Tanaka & Colin F. Camerer & Quang Nguyen, 2010. "Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam," American Economic Review, American Economic Association, vol. 100(1), pages 557-571, March.
    39. repec:fth:oxesaf:2000-17 is not listed on IDEAS
    40. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Lost In State Space: Are Preferences Stable?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 1091-1112, August.
    41. Ekelund, Jesper & Johansson, Edvard & Jarvelin, Marjo-Riitta & Lichtermann, Dirk, 2005. "Self-employment and risk aversion--evidence from psychological test data," Labour Economics, Elsevier, vol. 12(5), pages 649-659, October.
    42. Edwin Leuven, 2005. "The Economics of Private Sector Training: A Survey of the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 91-111, February.
    43. Gennaro Bernile & Vineet Bhagwat & P. Raghavendra Rau, 2017. "What Doesn't Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior," Journal of Finance, American Finance Association, vol. 72(1), pages 167-206, February.
    44. James G. March & Zur Shapira, 1987. "Managerial Perspectives on Risk and Risk Taking," Management Science, INFORMS, vol. 33(11), pages 1404-1418, November.
    45. Jansen, A., 2016. "Is investing in apprentices related to decision-makers' altruism and their high time preference?," ROA Research Memorandum 002, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    46. Stephan Meier & Charles D. Sprenger, 2015. "Temporal Stability of Time Preferences," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 273-286, May.
    47. Michael Kremer & Jean Lee & Jonathan Robinson & Olga Rostapshova, 2013. "Behavioral Biases and Firm Behavior: Evidence from Kenyan Retail Shops," American Economic Review, American Economic Association, vol. 103(3), pages 362-368, May.
    48. Jansen, A., 2016. "Is investing in apprentices related to decision-makers’ altruism and their high time preference?," Research Memorandum 010, Maastricht University, Graduate School of Business and Economics (GSBE).
    49. A. Rashad Abdel-Khalik, 2014. "CEO Risk Preference and Investing in R&D," Abacus, Accounting Foundation, University of Sydney, vol. 50(3), pages 245-278, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Koudstaal & Randolph Sloof & Mirjam van Praag, 2016. "Risk, Uncertainty, and Entrepreneurship: Evidence from a Lab-in-the-Field Experiment," Management Science, INFORMS, vol. 62(10), pages 2897-2915, October.
    2. Jetter, Michael & Magnusson, Leandro M. & Roth, Sebastian, 2020. "Becoming sensitive: Males’ risk and time preferences after the 2008 financial crisis," European Economic Review, Elsevier, vol. 128(C).
    3. Galizzi, Matteo M. & Machado, Sara R. & Miniaci, Raffaele, 2016. "Temporal stability, cross-validity, and external validity of risk preferences measures: experimental evidence from a UK representative sample," LSE Research Online Documents on Economics 67554, London School of Economics and Political Science, LSE Library.
    4. Giuseppe Albanese & Guido de Blasio & Paolo Sestito, 2017. "Trust, risk and time preferences: evidence from survey data," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(4), pages 367-388, December.
    5. Sharma, Smriti & Tarp, Finn, 2018. "Does managerial personality matter? Evidence from firms in Vietnam," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 432-445.
    6. Sepahvand, Mohammad & Shahbazian, Roujman, 2017. "Individual’s Risk Attitudes in sub-Saharan Africa: Determinants and Reliability of Self-reported Risk in Burkina Faso," Working Paper Series 2017:11, Uppsala University, Department of Economics.
    7. Falk, Armin & Becker, Anke & Dohmen, Thomas & Huffman, David B. & Sunde, Uwe, 2016. "The Preference Survey Module: A Validated Instrument for Measuring Risk, Time, and Social Preferences," IZA Discussion Papers 9674, Institute of Labor Economics (IZA).
    8. Beine, Michel & Charness, Gary & Dupuy, Arnaud & Joxhe, Majlinda, 2020. "Shaking Things Up: On the Stability of Risk and Time Preferences," IZA Discussion Papers 13084, Institute of Labor Economics (IZA).
    9. Hetschko, Clemens & Preuss, Malte, 2020. "Income in jeopardy: How losing employment affects the willingness to take risks," Journal of Economic Psychology, Elsevier, vol. 79(C).
    10. Kureishi, Wataru & Paule-Paludkiewicz, Hannah & Tsujiyama, Hitoshi & Wakabayashi, Midori, 2020. "Time preferences over the life cycle," SAFE Working Paper Series 267, Leibniz Institute for Financial Research SAFE.
    11. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    12. Pham, Huong Dien, 2017. "Do cultural factors alter the relationship between risk attitudes and economic welfare?," TVSEP Working Papers wp-003, Leibniz Universitaet Hannover, Institute of Development and Agricultural Economics, Project TVSEP.
    13. Armin Falk & Anke Becker & Thomas Dohmen & Benjamin Enke & David Huffman & Uwe Sunde, 2018. "Global Evidence on Economic Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 133(4), pages 1645-1692.
    14. Guido Blasio & Maria Paola & Samuele Poy & Vincenzo Scoppa, 2021. "Massive earthquakes, risk aversion, and entrepreneurship," Small Business Economics, Springer, vol. 57(1), pages 295-322, June.
    15. Mike Akesaka & Peter Eibich & Chie Hanaoka & Hitoshi Shigeoka, 2021. "Temporal Instability of Risk Preference among the Poor: Evidence from Payday Cycles," Discussion Papers dp21-05, Department of Economics, Simon Fraser University.
    16. Preuss, Malte, 2021. "Intra-individual stability of two survey measures on forward-looking attitude," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 201-227.
    17. Caliendo, Marco & Cobb-Clark, Deborah A. & Pfeifer, Harald & Uhlendorff, Arne & Wehner, Caroline, 2022. "Managers' Risk Preferences and Firm Training Investments," IZA Discussion Papers 15043, Institute of Labor Economics (IZA).
    18. Kureishi, Wataru & Paule-Paludkiewicz, Hannah & Tsujiyama, Hitoshi & Wakabayashi, Midori, 2021. "Time preferences over the life cycle and household saving puzzles," Journal of Monetary Economics, Elsevier, vol. 124(C), pages 123-139.
    19. Menkhoff, Lukas & Sakha, Sahra, 2017. "Estimating risky behavior with multiple-item risk measures," Journal of Economic Psychology, Elsevier, vol. 59(C), pages 59-86.
    20. Dohmen, Thomas & Lehmann, Hartmut & Pignatti, Norberto, 2016. "Time-varying individual risk attitudes over the Great Recession: A comparison of Germany and Ukraine," Journal of Comparative Economics, Elsevier, vol. 44(1), pages 182-200.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unm:umaror:2017002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/romaanl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Andrea Willems or Leonne Portz (email available below). General contact details of provider: https://edirc.repec.org/data/romaanl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.