Earnings Risk and Demand for Higher Education: A Cross-Section Test for Spain

18 Pages Posted: 16 Dec 2002

See all articles by Joop Hartog

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

Luís Díaz-Serrano

National University of Ireland, Maynooth; IZA Institute of Labor Economics

Date Written: November 2002

Abstract

We develop a simple human capital model for optimum schooling length when earnings are stochastic, and highlight the pivotal role of risk attitudes and the schooling gradient of earnings risk. We use Spanish data to document the gradient and to estimate individual response to earnings risk in deciding on attending university education, by measuring risk as the residual variance in regional earnings functions. We find that the basic response is negative but that in households with lower risk aversion, the response may be reversed to positive.

Keywords: Earnings Risk, Schooling Decisions

JEL Classification: I21

Suggested Citation

Hartog, Joop and Díaz-Serrano, Luís, Earnings Risk and Demand for Higher Education: A Cross-Section Test for Spain (November 2002). IZA Discussion Paper No. 641; Tinbergen Institute Working Paper No. 2002-122/3. Available at SSRN: https://ssrn.com/abstract=358291

Joop Hartog (Contact Author)

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

Luís Díaz-Serrano

National University of Ireland, Maynooth ( email )

2nd Floor
Iontas Building
Maynooth, County Kildare
Ireland

IZA Institute of Labor Economics

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

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