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A behavioral portfolio approach to multiple job holdings

Jaroslava Hlouskova (), Panagiotis Tsigaris (), Anetta Caplanova () and Rudolf Sivak ()
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Anetta Caplanova: University of Economics in Bratislava
Rudolf Sivak: University of Economics in Bratislava

Review of Economics of the Household, 2017, vol. 15, issue 2, 669-689

Abstract: Abstract In this paper we present an alternative explanation of multiple job holdings. It is based on a behavioral portfolio approach using prospect theory. Multiple job holdings is often a result of economic hardship but also because of peer comparisons. Workers may decide to take on a risky job like self-employment and engage into new ventures but also hold on to a safe employment in order to stay as close as possible to their reference level. While multiple job holdings might be the case for some, many others might decide to keep on working only at a safe job and do not engage into new risky ventures. This paper presents a behavioral economics model to explain such decisions. We find that the decision to hold multiple jobs depends on the degree of loss aversion, the value of the reference level and on the expected return in the risky venture. The worker will not seek for a risky job if she has an income reference level equal to what she can earn from a safe job. At any other reference level, the worker will seek new ventures provided she is compensated with a higher expected wage and is sufficiently loss averse.

Keywords: Multiple job holdings; Risk taking; Prospect theory; Reference level; Loss aversion (search for similar items in EconPapers)
JEL-codes: D81 E24 J2 (search for similar items in EconPapers)
Date: 2017
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