- Is there a risk-return trade-off in educational choices? Evidence from Spain
- Investigaciones económicas
- Pages (from-to)
- Issue number
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
We use data from Spain to test for an effect of earnings variance and skewness on individual wages. We carry out separate estimations for men and women. In accordance with the scant previous evidence mainly focused on the US, we report the existence of a risk-return trade-off across educational choices in the Spanish labor market. These results are in conformity with preferences of risk-averse individuals with decreasing absolute risk aversion and hence, with preference for skewness. In contrast with the previous literature, our analysis is based just in education cells, instead of on occupation or occupation/education cells. This improvement allows us to capture in a more suitable way the essence of earnings risk.
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