Does Relative Risk Aversion explain educational inequality? A dynamic choice approach

(2008) - Anders Holm, Mads Meier Jæger

Journal: Research in Social Stratification and Mobility
Link:: https://linkinghub.elsevier.com/retrieve/pii/S027656240800019X
DOI:: 10.1016/j.rssm.2008.05.004
Links::
Tags:: #paper #Attainment #RAT #Education
Cite Key:: [@holmDoesRelativeRisk2008]

Abstract

The theory of Relative Risk Aversion (RRA) suggests that educational decision making is motivated by the individual’s desire to avoid downward social class mobility and, furthermore, that this desire is stronger than the desire to pursue upward mobility. This paper develops a Dynamic Decision Process (DDP) model which tests the two central behavioral assumptions in the RRA theory that (1) individuals maximize utility when making educational decisions and (2) the RRA mechanism comprises an important component in the educational decision-making process. Furthermore, our DDP model allows for class-specific cultural values regarding education. We analyze data from the Danish Youth Longitudinal Study and find strong evidence that RRA affects educational decisions over and above traditional socioeconomic factors.

Notes

“The theory of Relative Risk Aversion (RRA) suggests that educational decision making is motivated by the individual’s desire to avoid downward social class mobility and, furthermore, that this desire is stronger than the desire to pursue upward mobility.” (Holm and Jæger, 2008, p. 199)

“In recent years new rational choice theories have been developed which attribute the persisting inequalities in educational attainment to differences in the utility individuals gain from education rather than to differences in family resources (e.g., Breen & Goldthorpe, 1997; Erikson & Jonsson, 1996b; Gambetta, 1987; Goldthorpe, 1996, 1998; Morgan, 1998, 2002, 2005).” (Holm and Jæger, 2008, p. 200)

“The RRA theory proposes three behavioral assumptions that explain why family background affects educational outcomes. The first assumption is that individuals’ educational choices are driven by a fundamental desire to avoid downward social mobility by reaching at least the same social class position as that of their parents” (Holm and Jæger, 2008, p. 200)

“The second assumption, that individuals are forward looking, distinguishes the RRA theory from most conventional theories of educational inequality (e.g., Bourdieu, 1977; McLanahan & Sandefur, 1994)” (Holm and Jæger, 2008, p. 200)

“Boudon (1974) introduced the idea of utility maximization in the sociological literature on educational inequality but suggested that the utility individuals derive from educational choices is social rather than economic in nature” (Holm and Jæger, 2008, p. 201)

“Following Boudon (1974), the theory of RRA (Breen & Goldthorpe, 1997; see also Goldthorpe, 1996, 1998) hypothesizes that the reason why secondary effects persist is that individuals with the same cognitive ability but with different social class backgrounds gain different utility from the same educational choice.” (Holm and Jæger, 2008, p. 201)

“The RRA theory assumes that people view education as an investment good and not as a consumption good. In other words, in the RRA theory education is treated as an instrument which individuals with different class backgrounds use to minimize the risk of downward mobility. Consequently, in the RRA theory social classes differ only with respect to their average cognitive ability and economic resources but not with respect to their intrinsic cultural “tastes” for education.” (Holm and Jæger, 2008, p. 202)

“For example, Hatcher (1998) and Nash (2003) cite several studies that find significant variations in educational values and norms across social classes which they argue do not simply reflect differences in socioeconomic resources (see also Gambetta, 1987; Murphy, 1981).” (Holm and Jæger, 2008, p. 202)

“Fig. 2. Typical pathways in the Danish educational system.” (Holm and Jæger, 2008, p. 203) Good diagram to emulate for PhD

“Fig. 3. Educational pathways by social class background.” (Holm and Jæger, 2008, p. 206) Again good diagram to emulate

“Furthermore, the analysis suggests that when forwardlooking behavior is taken into account, the effects of traditional sociological predictors of educational attainment, here father’s social class, are considerably attenuated. Consequently, we find strong evidence that RRA behavior explains some of the “raw” correlation between social class background and educational choice.” (Holm and Jæger, 2008, p. 216)