Does risk matter for occupational choices? Experimental evidence from an African labour market
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Does risk matter for occupational choices? Experimental evidence from an African labour market. / Falco, Paolo.
I: Labour Economics, Bind 28, 2014, s. 96-109.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Does risk matter for occupational choices? Experimental evidence from an African labour market
AU - Falco, Paolo
PY - 2014
Y1 - 2014
N2 - This paper investigates the role of risk-aversion in the allocation of workers between formal and informal jobs in Ghana. In the model I propose, risk-averse workers can opt between the free-entry informal sector and queuing for formal occupations. Conditional on identifying the riskier option, the model yields testable implications on the relationship between risk-preferences and workers' allocation. My testing strategy proceeds in two steps. First, I estimate expected income uncertainty through panel data and find it to be higher in the informal sector. Second, using novel experimental data to elicit individual attitudes to risk, I estimate the direct effect of risk-aversion on occupational choices and find that, in line with the first result, more risk-averse workers are more likely to queue for formal jobs and less likely to be in the informal sector. The results bear important implications for the optimal design of employment policies and social security. © 2014 Elsevier B.V.
AB - This paper investigates the role of risk-aversion in the allocation of workers between formal and informal jobs in Ghana. In the model I propose, risk-averse workers can opt between the free-entry informal sector and queuing for formal occupations. Conditional on identifying the riskier option, the model yields testable implications on the relationship between risk-preferences and workers' allocation. My testing strategy proceeds in two steps. First, I estimate expected income uncertainty through panel data and find it to be higher in the informal sector. Second, using novel experimental data to elicit individual attitudes to risk, I estimate the direct effect of risk-aversion on occupational choices and find that, in line with the first result, more risk-averse workers are more likely to queue for formal jobs and less likely to be in the informal sector. The results bear important implications for the optimal design of employment policies and social security. © 2014 Elsevier B.V.
KW - African labour markets
KW - Informality
KW - Occupational choices
KW - Risk-aversion
KW - Sector allocation
UR - http://www.mendeley.com/research/risk-matter-occupational-choices-experimental-evidence-african-labour-market
U2 - 10.1016/j.labeco.2014.03.005
DO - 10.1016/j.labeco.2014.03.005
M3 - Journal article
VL - 28
SP - 96
EP - 109
JO - Labour Economics
JF - Labour Economics
SN - 0927-5371
ER -
ID: 230688563