Education, Risk Preference and Wages

Sarah Brown () and Karl Taylor

No 2006002, Working Papers from The University of Sheffield, Department of Economics

Abstract: We explore the effect of risk preference on the educational attainment and wages of a sample of individuals drawn from the U.S. Panel Study of Income Dynamics (PSID). Using a sequence of questions from the 1996 PSID, we are able to construct measures of risk aversion and risk tolerance allowing us to explore the implications of interpersonal differences in risk preference for educational attainment. Our empirical findings suggest that risk preference has a significant influence on human capital accumulation, with the degree of risk aversion (tolerance) being inversely (positively) associated with educational attainment. In addition, our findings suggest that risk preference is a valid instrument for education in a standard Mincerian earnings function.

Keywords: Human Capital; Risk Aversion; Risk Preference; Wages. (search for similar items in EconPapers)
JEL-codes: J24 J30 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-02, Revised 2006-02
New Economics Papers: this item is included in nep-edu, nep-hrm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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