Social Status and Risk-Taking in a Model of Occupational Choice

Christiane Clemens

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: This paper is concerned with occupational choice under risk, where agents care about their social status. It is motivated by recent developments in the 'New Economy', which indicate that status preferences possibly provide an explanation for the observed shift towards entrepreneurial risk-taking. We find a positive tradeoff between status, risk and the attitude towards risk in a risk-averse society, where a higher proportion of agents chooses the entrepreneur class, compared to a status-neutral economy. We derive conditions for an optimal agree of individual status valuation. Although the population shares of laborers and entrepreneurs, and expected incomes converge towards the efficient values of the risk-neutral economy, when preferences for status increase, this is not true for expected utility, which asymptotically falls back to the equilibrium value of the status-neutral society. A second-best welfare maximum corresponds to an inefficient distribution of agents over the two types of occupations.

Keywords: risk-taking; occupational choice; social status (search for similar items in EconPapers)
JEL-codes: D5 D8 D9 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2002-05
References: Add references at CitEc
Citations:

Downloads: (external link)
http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-254.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:han:dpaper:dp-254

Access Statistics for this paper

More papers in Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät Contact information at EDIRC.
Bibliographic data for series maintained by Heidrich, Christian ().