Earnings Dispersion, Risk Aversion and Education

Christian Belzil and Jorgen Hansen

No 513, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 labor market earnings through wage dispersion and employment rate dispersion. We find a low degree of relative risk aversion (0.9282) and the estimates indicate that both wage and employment rate dispersions decrease significantly with schooling attainments. We find that a counterfactual increase in risk aversion will increase schooling attainments. Finally, the low degree of risk aversion implies that an increase in earnings dispersion would have little effect on schooling attainments.

Keywords: human capital; risk Aversion; returns to education; dynamic programming; earnings dispersion (search for similar items in EconPapers)
JEL-codes: J2 J3 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2002-06
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published - published in: Research in Labor Economics, 2004, 23, 335-358

Downloads: (external link)
https://docs.iza.org/dp513.pdf (application/pdf)

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)
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:iza:izadps:dp513

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().