Please use this identifier to cite or link to this item:
Belzil, Christian
Leonardi, Marco
Year of Publication: 
Series/Report no.: 
IZA Discussion Papers 2123
Using unique Italian panel data, in which individual differences in behavior toward risk are measured from answers to a lottery question, we investigate if (and to what extent) risk aversion can explain differences in schooling attainments. We formulate the schooling decision process as a reduced-form dynamic discrete choice. The model is estimated with a degree of flexibility virtually compatible with semi-parametric likelihood techniques. We analyze how grade transition from one level to the next varies with preference heterogeneity (risk aversion), parental human capital, socioeconomic variables and persistent unobserved (to the econometrician) heterogeneity. We present evidence that schooling continuation probabilities decrease with risk aversion at low grade levels, but increase with risk aversion at the time when the decision to enter higher education is made. However, differences in attitudes toward risk account for a modest portion of the probability of entering higher education. Differences in parental human capital and ability(ies) are much more important.
risk aversion
human capital
dynamic discrete choices
Document Type: 
Working Paper

Files in This Item:
245.09 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.