Compensating Wage Differentials for Schooling Risk in Denmark

21 Pages Posted: 2 Dec 2008

See all articles by Luis Diaz-Serrano

Luis Diaz-Serrano

Universitat Rovira i Virgili; IZA Institute of Labor Economics

Joop Hartog

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Helena Skyt Nielsen

Aarhus University - Department of Economics and Business; IZA Institute of Labor Economics

Abstract

In this paper we analyse the association between wage differentials and risk using detailed information on length and type of education as seen in Danish administrative registers. Our contribution to the literature is that we distinguish between transitory (time-series) and permanent (cross-sectional) income shocks, and estimate the compensation for both sorts of risk. We find that wage risk in a given education cell is associated with higher wages, while skewness is associated with lower wages. As a robustness check, we see that ad hoc risk measures based on earnings-mobility indicators confirm these findings.

Keywords: Risk premium, skewness affection, schooling risk, earnings shocks

JEL Classification: D8, J3

Suggested Citation

Diaz-Serrano, Luis and Hartog, Joop and Nielsen, Helena Skyt, Compensating Wage Differentials for Schooling Risk in Denmark. Scandinavian Journal of Economics, Vol. 110, Issue 4, pp. 711-731, December 2008. Available at SSRN: https://ssrn.com/abstract=1308720 or http://dx.doi.org/10.1111/j.1467-9442.2008.00558.x

Luis Diaz-Serrano (Contact Author)

Universitat Rovira i Virgili ( email )

Campus Sescelades, Carretera de Valls s/n
43006 Tarragona, Tarragona 43007
Spain

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Joop Hartog

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Helena Skyt Nielsen

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Alle 4
Aarhus, 8210
Denmark

HOME PAGE: http://person.au.dk/hnielsen@econ.au.dk

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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