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Risk Preferences and Training Investments

Author

Listed:
  • Caliendo, Marco

    (University of Potsdam)

  • Cobb-Clark, Deborah A.

    (University of Sydney)

  • Obst, Cosima

    (University of Potsdam)

  • Uhlendorff, Arne

    (CREST)

Abstract
We analyze workers' risk preferences and training investments. Our conceptual frame- work differentiates between the investment risk and insurance mechanisms underpin- ning 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.

Suggested Citation

  • Caliendo, Marco & Cobb-Clark, Deborah A. & Obst, Cosima & Uhlendorff, Arne, 2020. "Risk Preferences and Training Investments," IZA Discussion Papers 13828, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13828
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    2. Klauser, Roman & Tamm, Marcus, 2023. "Technological Change and Returns to Training," IZA Discussion Papers 16659, Institute of Labor Economics (IZA).
    3. Aisa, Rosa & Cabeza, Josefina & Martin, Jorge, 2023. "Automation and aging: The impact on older workers in the workforce," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    4. Cosima Obst, 2022. "Job Satisfaction and Training Investments," CEPA Discussion Papers 47, Center for Economic Policy Analysis.
    5. Liu, Kui & Meng, Chuyan & Yang, Shasha & Zhang, Guanglu, 2024. "Air pollution and individual risk preference: Evidence from China," Energy Economics, Elsevier, vol. 136(C).
    6. Liu, Changyu & Gong, Wanrong & Dong, Guanglong & Ji, Qiang, 2024. "Regulation of environmental, social and governance disclosure greenwashing behaviors considering the risk preference of enterprises," Energy Economics, Elsevier, vol. 135(C).
    7. Innocenti, Stefania & Golin, Marta, 2022. "Human capital investment and perceived automation risks: Evidence from 16 countries," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 27-41.
    8. Bratiloveanu Alexandra & Ignat Nicoleta Daniela & Croitoru Ionuț Marius, 2023. "Investment Risk – Bibliometric Analysis at the Level of EU States," Valahian Journal of Economic Studies, Sciendo, vol. 14(2), pages 23-38, December.

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    More about this item

    Keywords

    human capital investment; work-related training; risk preferences;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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