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RISK AVERSION AND MAJOR CHOICE: EVIDENCE FROM ITALIAN STUDENTS

Maria De Paola () and Francesca Gioia ()

No 201107, Working Papers from Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF

Abstract: Does the choice of the field of study depend on individual risk aversion? The direction of the relationship between individual risk attitudes and type of college major chosen is potentially ambiguous. On the one hand, risk adverse individuals may prefer majors allowing high returns on the labour market; on the other hand, if these majors expose students to a higher probability of dropping out, those who are more risk adverse may be induced to choose less challenging fields. Using data from a sample of students enrolled in 2009 at a middle-sized Italian public University, we find that, controlling for a large number of individual characteristics, including cognitive abilities, personality traits and family background, more risk adverse students are more likely to choose any other field (Humanities, Engineering and Sciences) compared to Social Sciences. We interpret this result considering that some of these fields, such as Humanities, allow to reduce the risk of dropping out, while others (such as Engineering and Sciences)involve a lower risk on the labour market. It also emerges that the effect of risk aversion on major choice is related to student ability. Risk adverse students characterized by high abilities tend to prefer Engineering, while the propensity of risk adverse students to enrol in Humanities decreases when ability increases, suggesting that the attention paid to labour market risks and drop out risks varies according to student skills.

Keywords: Risk aversion; College choice; Education (search for similar items in EconPapers)
JEL-codes: I21 J24 Z13 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2011-07
New Economics Papers: this item is included in nep-cbe, nep-edu, nep-lab, nep-neu and nep-upt
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