Risk and Return Trade-Offs in Lifetime Earnings
Eleanor W. Dillon
Journal of Labor Economics, 2018, vol. 36, issue 4, 981 - 1021
This paper documents differences in lifetime earnings risk across occupations due to wage risk, employment risk, and midcareer occupation changes, which can mitigate other shocks. Total lifetime earnings risk varies considerably across starting occupation, and riskier occupations pay more in expectation. The average worker would give up at least 9% of total lifetime earnings in the least certain occupation to reduce the riskiness of that occupation to the level of the safest starting occupation. The insurance value of occupational mobility is quantitatively important. With mobility, workers absorb only 60%, on average, of negative occupation-specific wage shocks.
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlabec:doi:10.1086/697475
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