Can Risk Aversion Explain Schooling Attainments? Evidence from Italy

Christian Belzil and Marco Leonardi

No 2123, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using unique Italian panel data, in which individual differences in behavior toward risk are measured from answers to a lottery question, we investigate if (and to what extent) risk aversion can explain differences in schooling attainments. We formulate the schooling decision process as a reduced-form dynamic discrete choice. The model is estimated with a degree of flexibility virtually compatible with semi-parametric likelihood techniques. We analyze how grade transition from one level to the next varies with preference heterogeneity (risk aversion), parental human capital, socioeconomic variables and persistent unobserved (to the econometrician) heterogeneity. We present evidence that schooling continuation probabilities decrease with risk aversion at low grade levels, but increase with risk aversion at the time when the decision to enter higher education is made. However, differences in attitudes toward risk account for a modest portion of the probability of entering higher education. Differences in parental human capital and ability(ies) are much more important.

Keywords: human capital; education; risk aversion; dynamic discrete choices (search for similar items in EconPapers)
JEL-codes: J24 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2006-05
New Economics Papers: this item is included in nep-dcm, nep-edu, nep-hrm, nep-upt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published - published in: Labour Economics, 2007, 14 (6), 657-970

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Journal Article: Can risk aversion explain schooling attainments? Evidence from Italy (2007)
Working Paper: Can Risk Aversion Explain Schooling Attainments?: evidence from Italy (2007)
Working Paper: Can Risk Aversion Explain Schooling Attainments? Evidence From Italy (2006)
Working Paper: Can Risk Aversion Explain Schooling Attainments? Evidence From Italy (2006)
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