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- Title
Impatience, Information and Risk Taking in a General Equilibrium Model of Occupational Choice.
- Authors
Kanbur, S.M.
- Abstract
Once it is recognized that many risks have a temporal structure, some natural questions arise on the role of risk taking in a temporal setting, and on the influence of impatience on risk taking. This paper develops a general equilibrium model of occupational choice in order to make precise one particular role of risk taking in a temporal framework, and uses this framework to characterize the relationship between risk taking and the pattern of impatience in a society. In a model of entrepreneurship with ability uncertainty, we envisage a situation where by entering a risky activity an agent can acquire information about his ability, which is useful for future occupational choice. This informational value has to be set against the costs of risk taking. A general equilibrium between risky and safe activities is then characterized and a relationship is derived between risk taking and the pattern of impatience in the society. The plan of this paper is as follows. The next section develops the model and characterizes general equilibrium in the case where preferences are homogeneous. Section 3 extends the model to the case where time rates of discount within a society are heterogeneous. Section 4 considers the implications of the theoretical framework for standard empirical techniques which are used to estimate occupational rates of return. Section 5 concludes this paper.
- Subjects
VOCATIONAL guidance; ECONOMIC equilibrium; RISK-taking behavior; PATIENCE; OCCUPATIONS; RATE of return; ENTREPRENEURSHIP; ECONOMICS
- Publication
Review of Economic Studies, 1979, Vol 46, Issue 4, p707
- ISSN
0034-6527
- Publication type
Article
- DOI
10.2307/2297037