Risk Preference and Employment Contract Type

Sarah Brown, Lisa Farrell, Mark N Harris, John G Sessions

Research output: Contribution to journalArticle

25 Citations (Scopus)

Abstract

We explore the possibility that a systematic relationship exists between employment within a particular type of contract and risk preference. We exploit a set of proxies for risk preference, whereby some of the proxies capture risk loving behaviour (expenditure on gambling, smoking and alcohol) whereas others capture risk averse behaviour (expenditure on life and contents insurance, and unearned income). The empirical analysis, based on pooled cross-section data from the UK Family Expenditure Survey, 1997-2000, provides evidence of a systematic relationship between employment contract type and risk preference, with, for example, self-employed workers being more or less likely to engage in the consumption of 'risky' or financial security products respectively. The results are based on the ordered generalized extreme value model, a relatively infrequently used discrete choice model, which allows for ordering and correlation in the alternatives observed.
Original languageEnglish
Pages (from-to)849-63
Number of pages15
JournalJournal of the Royal Statistical Society: Series A - Statistics in Society
Volume169
Issue number4
Publication statusPublished - 2006

Keywords

  • Skills
  • Labor Productivity (J240)
  • Human Capital
  • Labor Demand (J230)
  • Criteria for Decision-Making under Risk and Uncertainty (D810)
  • Labor Contracts (J410)
  • Occupational Choice

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    Brown, S., Farrell, L., Harris, M. N., & Sessions, J. G. (2006). Risk Preference and Employment Contract Type. Journal of the Royal Statistical Society: Series A - Statistics in Society, 169(4), 849-63.