Risk and Career Choice

Saks Raven E and Shore Stephen H
Additional contact information
Saks Raven E: Harvard University, raven.e.saks@frb.gov
Shore Stephen H: University of Pennsylvania, shore@jhu.edu

The B.E. Journal of Economic Analysis & Policy, 2005, vol. 5, issue 1, 45

Abstract: Choosing a type of education is one of the largest financial decisions we make. Educational investment differs from other types of investment in that it is indivisible and non-tradable. These differences lead agents to demand a premium to enter careers with more idiosyncratic risk. Since the required premium will be smaller for wealthier agents, they will tend to enter careers with more idiosyncratic risk.After developing a model of career choice, we use data from the Panel Study of Income Dynamics (PSID) to estimate the risk associated with different careers. We find education, health care, and engineering careers to have relatively safe streams of labor income; business, sales, and entertainment careers are more risky.By choosing a college major, many students make a costly human capital investment that allows them to enter a specific career. To examine the link between wealth and college major choice implied by the model, we use data on choice of college major from the National Postsecondary Student Aid Survey (NPSAS). Controlling for observable measures of ability and background, we find evidence that wealthier students tend to choose riskier careers, particularly business.

Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
https://doi.org/10.1515/1538-0637.1414 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejeap:v:advances.5:y:2005:i:1:n:7

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejeap/html

DOI: 10.1515/1538-0637.1414

Access Statistics for this article

The B.E. Journal of Economic Analysis & Policy is currently edited by Hendrik Jürges and Sandra Ludwig

More articles in The B.E. Journal of Economic Analysis & Policy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().