Risk Aversion and Sorting into Public Sector Employment

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. Terms of use: Documents in Risk Aversion and Sorting into Public Sector EmploymentChristian Pfeifer 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 World Net. 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. 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. ABSTRACT Risk Aversion and Sorting into Public Sector Employment *This research note uses two German data sets -the large-scale German Socio-Economic Panel and unique data from own student questionnaires -to analyse the relationship between risk aversion and the choice for public sector employment. Main results are: (1) more risk averse individuals sort into public sector employment, (2) the impact of career specific and unemployment risk attitudes is larger than the impact of general risk attitudes, and (3) risk taking is rewarded with higher wages in the private but not in the public sector.JEL Classification: J24, J31, J45

Employment sector and pay gaps: Genetic and environmental influences

“…Based on this finding, they conclude that the positive relationship found in standard models is not structural but rather reflects unobserved heterogeneity. (Bellante et al 1981, Christofides et al 2002, Hartog et al 2002, Pfeifer 2011. 2 In addition, the public sector has long experienced serious difficulty recruiting high-quality labour.…”

Gender wage gaps and risky vs. secure employment: An experimental analysis

“…and showed that the probability of choosing to work in the public sector increases as the degree of risk aversion increases. A recent study using the large scale German Socio Economic Panel found that risk averse workers tend to sort into public sector employment while risk taking is rewarded with higher wages in the private sector (Pfeifer, 2011). With the use of revealed risk preferences data, Buurman et al (2012) validate the argument that public workers are significantly less likely to choose the risky option (lotteries).…”

Wages in and out of the public sector: new insights for six selected European countries

“…It means that if the wage is similar there could be a queue to enter in the public sector. Bonin et al (2007) and Pfeifer (2011), using German Socioeconomic Panel data, find that the probability of being employed in the public sector is higher for risk adverse workers.…”

“…Finally there is a third group, composed of few studies, that tries to investigate the peculiar characteristics of public employees, including civil servants' motivations, such as altruism and mission oriented (see for example Francois, 2000;Besley andGhatak, 2005, Buurman et al, 2012), the different degree of aversion to risk of public and private employees (Bellante and Link, 1981;Bonin et al, 2007;Pfeifer, 2011), the great attractiveness for public employees of high job security (Cappellari, 2002) and low wage mobility (Budria, 2010;Postel-Vinay and Turon, 2007). For example, Bellante and Link (1981) suggest that if the sorting process in the public and private sector depends on the degree of risk aversion, then those individuals with a high degree of aversion to risk will be more likely than others to seek employment in the public sector.…”