Educational Attainment and Risk Preference

Abstract

We explore the relationship between risk preference and educational attainment for a sample of adults drawn from the 1996 U.S. Panel Study of Income Dynamics (PSID). Using a sequence of questions from the 1996 PSID, we construct measures of an individual´s risk aversion and risk tolerance allowing us to explore the implications of interpersonal differences in risk preference for educational attainment. Our empirical findings suggest that an individual´s degree of risk aversion (tolerance) is inversely (positively) associated with their educational attainment. In addition, using the 1997 and 2002 Child Development Supplements of the PSID, we explore the relationship between the risk preference of parents and the academic achievements of their children. Our findings suggest that a parent´s degree of risk aversion (tolerance) is negatively (positively) related to the academic achievements of their children