Are upper-secondary track decisions risky? Evidence from Sweden on the assumptions of risk-aversion models

Abstract

Relative risk aversion (RRA) models explain class inequalities in education with reference to risk avoidance, i.e., the risky choice assumption (RCA). Whether education entails any risks has been subject to minimal scrutiny. In this paper, we test whether or not vocational education is a safety net that protects from marginalization but at the cost of limited access to tertiary education and service class positions. We present an empirical assessment for upper-secondary track choices in Sweden, contrasting the vocational and the academic tracks for those that do not pursue higher educational degrees. The only evidence in favor of the RCA is that when taking selection into account, graduates of the academic track without a tertiary degree initially face higher risks of not being stably employed in their early 20s than their counterparts from vocational education. Differences between secondary tracks in registered unemployment risks are small throughout the life course and, if anything, they favor the academic track for both genders and cohorts. Moreover, the academic track significantly protects men of both cohorts from the risk of entering unskilled routine occupations. We conclude that the support for the RCA is scant at best.