Risk Preferences and Training Investments

Marco Caliendo, Deborah Cobb-Clark, Cosima Obst (obst@empwifo.uni-potsdam.de) and Arne Uhlendorff
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Cosima Obst: University of Potsdam

No 23, CEPA Discussion Papers from Center for Economic Policy Analysis

Abstract: We analyze workers’ risk preferences and training investments. Our conceptual framework differentiates between the investment risk and insurance mechanisms underpinning training decisions. Investment risk leads risk-averse workers to train less; they undertake more training if it insures them against future losses. We use the German Socio-Economic Panel (SOEP) to demonstrate that risk affinity is associated with more training, implying that, on average, investment risks dominate the insurance benefits of training. Crucially, this relationship is evident only for general training; there is no relationship between risk attitudes and specific training. Thus, as expected, risk preferences matter more when skills are transferable – and workers have a vested interest in training outcomes – than when they are not. Finally, we provide evidence that the insurance benefits of training are concentrated among workers with uncertain employment relationships or limited access to public insurance schemes.

Keywords: Human Capital Investment; Work-related Training; Risk Preferences (search for similar items in EconPapers)
JEL-codes: C23 D81 J24 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-eur, nep-ias, nep-lma and nep-ltv
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Citations: View citations in EconPapers (2)

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https://doi.org/10.25932/publishup-48092 (application/pdf)

Related works:
Journal Article: Risk preferences and training investments (2023)
Working Paper: Risk preferences and training investments (2023)
Working Paper: Risk Preferences and Training Investments (2020)
Working Paper: Risk Preferences and Training Investments (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pot:cepadp:23

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