Occupational sorting of school graduates: The role of economic preferences

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. We relate risk attitudes and patience of young graduates from high-school, college and university, measured around the time that they start their labor market career in a large representative survey, to the riskiness and timing of earnings in the occupations they choose to work in. We find a systematic positive and significant relation between willingness to take risks and measures of occupational earnings risks and employment risk that we derive from a large administrative data set. Patient individuals are significantly more likely to choose for occupations with a steep earnings profile. Individuals whose economic preferences are not well aligned with the riskiness and timing of earnings in their initial occupation are more likely to change to an occupation that better matches their economic preferences.JEL Classification: J24, J31, D01

The Value of a Statistical Life for Risk‐Averse and Risk‐Seeking Individuals

“…The second strand of the literature presents evidence on the negative effect of risk aversion on wages (Bonin et al, 2007;Le et al, 2011). Other evidence shows that willingness to take risk is positively correlated with an individual's occupation-specific wage dispersion (Fouarge, Kriechel, & Dohmen, 2014;Pollmann et al, 2013). There is also research that shows that risk aversion is linked to wage growth (Budria, Diaz-Serrano, Ferrer-i Carbonell, & Hartog, 2013;Shaw, 1996).…”

Time preferences and career investments

“…The answers to these statements indicate how much value the individual puts on the present compared to the future. Interestingly, empirical work has shown that the CFC items are significantly correlated with conventional time preference measures (Borghans and Golsteyn, 2006;Daly et al, 2009) and predict field behaviour (Van Huizen and Plantenga, 2014;Fouarge et al, 2014). 6 Between 1996 and 2009, the DHS included the CFC items in every wave, except for the 2008 wave.…”

“…Both studies emphasise the role of time preferences in the development of human capital. Other papers (e.g., Fouarge et al, 2014) assess to what extent economic preferences of recent graduates predict their occupational choice. These previous studies focus on mechanisms before entering the labour market (i.e., educational and occupational choice).…”

“…However, this twelfth item is missing in the waves 1996-2003 and is therefore not included in the analysis. 6 Van Huizen and Plantenga (2014) demonstrate that the items are associated to job search behaviour of the unemployed Fouarge et al (2014). show that CFC02 is related to occupational choice of recent graduates.…”

Risk, Uncertainty and Entrepreneurship: Evidence from a Lab-in-the-Field Experiment

“…Although the general consensus tends to be that preferences in the domain of risk and uncertainty are stable (see e.g. Borghans et al, 2008, Sahm, 2012, and Fouarge et al, 2014, a recent study by Brachert and Hyll (2014) cast serious doubt on the stability of these preferences. Therefore, the descriptive nature of the study prevents us from drawing causal conclusions.…”