Premium
Risk preference and employment contract type
Author(s) -
Brown Sarah,
Farrell Lisa,
Harris Mark N.,
Sessions John G.
Publication year - 2006
Publication title -
journal of the royal statistical society: series a (statistics in society)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.103
H-Index - 84
eISSN - 1467-985X
pISSN - 0964-1998
DOI - 10.1111/j.1467-985x.2006.00424.x
Subject(s) - preference , economics , revealed preference , consumption (sociology) , actuarial science , discrete choice , risk aversion (psychology) , set (abstract data type) , alcohol consumption , value (mathematics) , econometrics , microeconomics , expected utility hypothesis , financial economics , statistics , alcohol , mathematics , computer science , social science , biochemistry , chemistry , sociology , programming language
Summary. 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.