Abstract
Using CES earnings data, I estimate the private, risk-adjusted value of industry-specific human capital for employees in 72 industries. For each industry, I obtain the certainty equivalent income, which renders an individual indifferent between receiving and consuming this income and implementing the optimal consumption and portfolio choice decisions that solve the average Euler equations for employees in that industry. Depending on the industry of employment, every dollar initially earned is worth between 86 and 99 cents, when adjusted for the risks in industry-specific per-capita income growth, and the potential to hedge these risks with investments in the aggregate stock market. Inter-industry differences in certainty equivalent income per dollar of initial earnings can be explained by cross-sectional variation in the time series moments of the joint distribution of income growth and stock return. Cokurtosis, the tendency to generate left skewness in per-capita income growth in recessions, is as important as correlation.
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