Cross-sectional earnings risk and occupational sorting The role of risk attitudes

This paper investigates to what extent individuals' risk preferences are correlated with the cross-sectional earnings risk of their occupation. We exploit data from the German Socio-Economic Panel, which contains a direct survey question about willingness to take risks that has been shown to be...

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Bibliographic Details
Published inLabour economics Vol. 14; no. 6; pp. 926 - 937
Main Authors Bonin, Holger, Dohmen, Thomas, Falk, Armin, Huffman, David, Sunde, Uwe
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.12.2007
Elsevier
SeriesLabour Economics
Subjects
Berufswahl
Bildungsertrag
Deutschland
Earnings risk
Einkommen
Occupational choice
Präferenz
Risiko
Risk preferences
SOEP
Sorting
Theorie
SOEP
D01
Earnings risk
J31
Risk preferences
D81
Occupational choice
J24
Sorting
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Summary:This paper investigates to what extent individuals' risk preferences are correlated with the cross-sectional earnings risk of their occupation. We exploit data from the German Socio-Economic Panel, which contains a direct survey question about willingness to take risks that has been shown to be a behaviorally valid measure of risk aversion. As a measure of earnings risk, we use the cross-sectional variation in earnings that is left unexplained by human capital variables in Mincerian wage regressions. Our evidence shows that individuals with low willingness to take risks are more likely to work in occupations with low earnings risk. This pattern is found regardless of the level of occupation categories, region, gender and labor market experience.
ISSN:0927-5371
1879-1034
DOI:10.1016/j.labeco.2007.06.007