Cross-Sectional Earnings Risk and Occupational Sorting: The Role of Risk Attitudes

By Holger Bonin, Thomas J. Dohmen, Armin Falk, David Huffman, Uwe Sunde. Social Science Research Network, 2006

496 citations recorded by the source corpus.

This paper investigates whether risk preferences explain how individuals are sorted into occupations with different earnings variability. We exploit data from the German Socio-Economic Panel, which contains a subjective assessment of willingness to take risks whose behavioral relevance has been validated in previous work. As a measure of earnings risk, we use the cross-sectional variation in earnings that is left unexplained by human capital in Mincerian wage regressions. By relating earnings risk to the measure of individual risk preference, our evidence shows that individuals with low willingness to take risks are more likely to be sorted into occupations with low earnings risk. This pattern is found regardless of the level of occupation categories, region, gender and labor market experience. We also find that risk preferences are significant determinant of wages in a Mincer regression, illustrating the importance of preferences and attitudes in addition to more standard regressors.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/761a3f1b09b7f7f223c74403b572392fa1335b09

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Citations in the corpus

The psychometric and empirical properties of measures of risk preferences (2017, unknown): “…2009).25 The difference between males and females may be important from a policy point of view and it may account for part of the gender wage-gap: Bonin et al. (2007) find that individuals who are more willing to take risks sort into occupations with more earnings risks and higher average…”
Occupation and Gender (2017, background): “Bonin et al. (2007) study the effect of earnings risk, measured as the variation in the unexplained component of wages, on occupational choice.”
Why Do Wealthy Parents Have Wealthy Children? (2020, unknown): “Charles and Hurst, 2003; Boserup et al., 2014).6 To analyze how people compose their investment portfolio, we follow the literature in considering a two asset-portfolio: Risky assets are defined as the sum of mutual funds with a stock component and directly held stocks; the other components of finan”
The Gender Effect in Risky Asset Holdings (2012, methodology): “The same risk attitude measure is thereafter used in several studies (for example, Bonin et al., 2007; Dohmen et al. 2010; Dohmen and Falk, 2011; Dohmen, Falk, Huffman, and Sunde, 2011).”
Who Wears the Pants? Gender Identity Norms and Intrahousehold Financial Decision‐Making (2017, unknown): “Risk attitude is a natural candidate because it is well documented in the literature that risk preference is an important determinant of both portfolio choices and career choices (Vissing-Jørgensen and Attanasio, 2003; Bonin et al., 2007).”
Are early stage investors biased against women? (2020, background): “For example, Bonin et al. (2007) find that risk preferences predict occupational sorting.”
Performance Pay and Multi-Dimensional Sorting: Productivity, Preferences and Gender (2006, background): “Our findings on gender and risk complement recent evidence from survey data that suggest that risk attitude are important for occupational sorting: Bonin et al. (2006) find that individuals who are more willing to take risks are more likely to work in occupations with higher earnings variability. Do”
Noncognitive Skills, Occupational Attainment, and Relative Wages (2009, unknown): “Moreover, women are employed in safer jobs (DeLeire and Levy, 2001; Grazier and Sloane, 2008) or in jobs with low earnings risk (Bonin et al., 2007), which is consistent with the evidence that they are more risk averse than men (see Eckel and Grossman (2008) for a review).”
Matching Firms, Managers, and Incentives (2015, unknown): “[12] Bonin, Holger; Dohmen, Thomas; Falk, Armin; Huffman, David and Sunde, Uwe.”
The Intergenerational Transmission of Risk and Trust Attitudes (2012, background): “6 self-employed.8 Responses to the general risk question have also been shown to explain sorting into occupations based on earnings variance (Bonin et al., 2007), and to have a large impact on the probability of moving residence between geographical regions (Jaeger et al., 2007).”
Sorting through Affirmative Action: Three Field Experiments in Colombia (2017, methodology): “1 For instance, Bonin et al. (2007) consider the effect of wage volatility; Kluve and Schaffner (2007) consider health risk; Guiteras and Jack (2014) and Dal Bó et al. (2013) consider the effect of value of the compensation; Ashraf, Bandiera, and Kelsey (2014) consider the salience of career incenti”
Self-Selection and the Efficiency of Tournaments (2009, unknown): “They are consistent with the survey analysis by Bonin et al. (2006) carried out on German data, which shows that risk averse employees tend to concentrate in jobs with low earnings risks.”
Public Sector Employees: Risk Averse and Altruistic? (2012, unknown): “[4] Bonin, Holger, Thomas Dohmen, Armin Falk, David Huffman, and Uwe Sunde (2007), Cross-sectional Earnings Risk and Occupational Sorting: The Role of Risk Attitudes, Labour Economics, 14(6): 926-937.”