Risk attitudes and return to education: the effect of risk attitudes on the level of reservation wages among young Korean adults

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

PhD Seminar (Econ)

Date & time

Friday 10 April 2015
9.30am–11.00am

Venue

Seminar Room 3, Level 1, JG Crawford Building 132, Lennox Crossing, ANU

Speaker

Eunsup Jang, PhD Scholar, Crawford School.

Contacts

Robert Sparrow
61253885

Based on the human capital investment model, this study empirically investigates the effect of risk attitudes on the level of reservation wages of Korean young adults. Reservation wage in part reflects an agent’s expectation on the benefits of attaining higher education. The results show that risk-loving Korean females tend to have higher level of reservation wages compared to that of risk-neutral females. For them, the magnitude of risk attitudes is as large as that of their fathers’ education. Given that most of observations in this study are from recent university graduates, their reservation wages will have a lasting impact on their life-long income by affecting their initial level of wages which will play a role as reference to future job offers. Additionally, this study shows that young adults with educational debt have lower level of reservation wage, which suggests they are pressed to take lower-paying jobs to pay off their debt.

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