Earnings Dispersion, Risk Aversion and Education

Jorgen Hansen and Christian Belzil

No 3600, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We estimate a dynamic programming model of schooling decisions in which the degree of risk aversion can be inferred from schooling decisions. In our model, individuals are heterogeneous with respect to school and market abilities but homogeneous with respect to the degree of risk aversion. We allow endogenous schooling attainments to affect the level of risk experienced in labour market earnings through wage dispersion and employment rate dispersion. We find a low degree of relative risk aversion (0.9282) and find that a counterfactual increase in risk aversion will increase schooling attainments. The estimates indicate that both wage and employment rate dispersions decrease significantly with schooling attainments.

Keywords: Dynamic programming; Returns to education; Risk aversion; Human capital; Earnings dispersion (search for similar items in EconPapers)
JEL-codes: J20 J30 (search for similar items in EconPapers)
Date: 2002-10
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (18)

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Related works:
Chapter: EARNINGS DISPERSION, RISK AVERSION AND EDUCATION (2004)
Working Paper: Earnings Dispersion, Risk Aversion and Education (2004)
Working Paper: Earnings Dispersion, Risk Aversion and Education (2004)
Working Paper: Earnings Dispersion, Risk Aversion and Education (2002)
Working Paper: Earnings Dispersion, Risk Aversion and Education (2002)
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