Risk and Career Choice

Saks, Raven E.; Shore, Stephen H.

doi:10.1515/1538-0637.1414

Cited by 40 publications

(39 citation statements)

References 24 publications

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“…(Table 1 reports 10th and 90th percentiles of wages by major.) Saks & Shore (2005) find that students from wealthier families are more likely to choose "riskier" majors, as is implied by a model in which agents have decreasing absolute risk aversion. Christiansen et al (2007) investigate the risk-return trade-off in major choice and conclude that many majors are not at the efficient frontier.…”

Section: Expected Earningsmentioning

confidence: 66%

Heterogeneity in Human Capital Investments: High School Curriculum, College Major, and Careers

2012

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Motivated by the large differences in labor market outcomes across college majors, we survey the literature on the demand for and return to high school and postsecondary education by field of study. We combine elements from several papers to provide a dynamic model of education and occupation choice that stresses the roles of the specificity of human capital and uncertainty about preferences, ability, education outcomes, and labor market returns. The model implies an important distinction between the ex ante and ex post returns to education decisions. We also discuss some of the econometric difficulties in estimating the causal effects of field of study on wages in the context of a sequential choice model with learning. Finally, we review the empirical literature on the choice of curriculum and the effects of high school courses and college major on labor market outcomes.

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Section: Expected Earningsmentioning

confidence: 66%

Heterogeneity in Human Capital Investments: High School Curriculum, College Major, and Careers

2012

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“…7 7 A small recent literature builds on the human capital literature in labor economics and treats education as a risky investment that is chosen jointly with risky financial assets (Palacios‐Huerta (2003), Saks and Shore (2005)). …”

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confidence: 99%

Household Finance

Campbell¹

2006

The Journal of Finance

2,186

1,053

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The study of household finance is challenging because household behavior is difficult to measure, and households face constraints not captured by textbook models. Evidence on participation, diversification, and mortgage refinancing suggests that many households invest effectively, but a minority make significant mistakes. This minority appears to be poorer and less well educated than the majority of more successful investors. There is some evidence that households understand their own limitations and avoid financial strategies for which they feel unqualified. Some financial products involve a cross-subsidy from naive to sophisticated households, and this can inhibit welfare-improving financial innovation.A PRESIDENTIAL ADDRESS IS A PRIVILEGED OPPORTUNITY to ask questions without answering them, and to suggest answers without proving them. I use this opportunity to explore a field, household finance, that has attracted much recent interest but still lacks definition and status within our profession. Teaching and research are presently organized primarily around the traditional fields of asset pricing and corporate finance. Economists in the former field ask how asset prices are determined in capital markets and how average asset returns ref lect risk. Economists in the latter field ask how business enterprises use financial instruments to further the interests of their owners, and in particular to resolve agency problems.By analogy with corporate finance, household finance asks how households use financial instruments to attain their objectives. Household financial problems have many special features that give the field its character. Households must plan over long but finite horizons; they have important nontraded assets, notably their human capital; they hold illiquid assets, notably housing; they face constraints on their ability to borrow; and they are subject to complex taxation.

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“…In particular, a child with more insurance may be more likely to undertake risky investments. For example, children may be more willing to start their own business, or to choose college majors with less certain financial rewards., Indeed, Saks and Shore (2004) find that children from wealthier families tend to choose college majors that are associated with riskier income streams, such as business. In addition, children with greater levels of informal insurance may put forth less effort on the job or at school, and they may maintain lower levels of savings.…”

Section: Discussionmentioning

confidence: 99%

Escaping the Samaritan's Dilemma: Implications of a Dynamic Model of Altruistic Intergenerational Transfers

Perozek

2005

FEDS

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This paper explores how altruistic parents structure transfer rules in response to potential incentive problems and how the investment behavior of children is influenced by these transfer policies. To investigate these issues, I develop a dynamic model of altruistic transfers in which transfers can be tied to the purchase of human capital investment. Numerical solutions are examined to provide insight into the predictions of the model for transfer behavior and investment by family size. The dynamic framework developed in the paper is used to guide the interpretation of data on transfers and education investment by children in the Health and Retirement Survey. The data are consistent with the prediction of the model that children in larger families invest more in education conditional on initial transfers.

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Risk and Career Choice

Cited by 40 publications

References 24 publications

Heterogeneity in Human Capital Investments: High School Curriculum, College Major, and Careers

Heterogeneity in Human Capital Investments: High School Curriculum, College Major, and Careers

Household Finance

Escaping the Samaritan's Dilemma: Implications of a Dynamic Model of Altruistic Intergenerational Transfers

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