Education and Risk Compensation in Wages: A Quantile Regression Approach

José Vieira, Carolina Constância and Joao Teixeira ()
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Carolina Constância: University of the Azores

No 12237, IZA Discussion Papers from IZA Network @ LISER

Abstract: This paper examines the effect of wage variation on individual wages. The results reveal that wage variation by educational classifications positively affects wages, while the skewness has a negative effect. As has been referred in previous literature on the issue, both results are consistent with the notion of wage compensation for risk-averse workers. However, our results show that the impact of wage-variation on wages is not reasonably described by a single parameter for all individuals. Such an effect is heterogeneous and varies throughout the conditional wage distribution. Indeed, the positive effect of dispersion increases, and the negative effect of skewness decreases, as we move up on the conditional wage distribution. Apparently, those at the upper end of the conditional wage distribution have both higher risk-aversion and higher affection for skewness.

Keywords: quantile regression; wage formation; education; risk compensation (search for similar items in EconPapers)
JEL-codes: J31 J33 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2019-03
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Published - published in: Applied Economics Letters, 2020, 27 (3), 194 - 198.

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Journal Article: Education and risk compensation in wages: a quantile regression approach (2020)
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