Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/226813 
Year of Publication: 
2020
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research No. 1113
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
We analyze workers' risk preferences and training investments. Our conceptual framework differentiates between the investment risk and insurance mechanisms underpinning training decisions. Investment risk leads risk-averse workers to train less; they undertake more training if it insures them against future losses. We use the German Socio-Economic Panel (SOEP) to demonstrate that risk affinity is associated with more training, implying that, on average, investment risks dominate the insurance benefits of training. Crucially, this relationship is evident only for general training; there is no relationship between risk attitudes and specific training. Thus, as expected, risk preferences matter more when skills are transferable { and workers have a vested interest in training outcomes { than when they are not. Finally, we provide evidence that the insurance benefits of training are concentrated among workers with uncertain employment relationships or limited access to public insurance schemes.
Subjects: 
Human Capital Investment
Work-related Training
Risk Preferences
JEL: 
J24
C23
D81
Document Type: 
Working Paper

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