Risk Aversion and Sorting into Public Sector Employment

Abstract

This research note uses two German datasets – the large-scale German Socioeconomic Panel and unique data from own student questionnaires – to analyse the relationship between risk aversion and the choice for public sector employment. Main results are (1) more risk-averse individuals sort into public sector employment, (2) the impact of career-specific and unemployment risk attitudes is larger than the impact of general risk attitudes and (3) risk taking is rewarded with higher wages in the private but not in the public sector.