Relative Risk Aversion from a Dynamic Perspective. Explaining Educational Mobility

Abstract

This paper deals with the principle of relative risk aversion (RRA), which has been put forward by Breen and Goldthorpe (1997) as an explanation of inequality in educational attainment. While the original idea of the concept is to account for the basic mechanisms that produce educational inequality, this paper argues that RRA can also provide an explanation of dynamic processes related to changes in educational attainment over successive birth cohorts. RRA provides a rationale for educational upward mobility vis-a-vis the parents’ generation whenever educational requirements attached to occupations change. Relatedly, RRA can also account for changes in educational inequality if these processes vary with social origin. The paper elaborates on these implications theoretically and also suggests an empirical analytical framework for testing the explanatory contribution that the RRA principle can make to changes in educational mobility and inequality. The empirical analyses refer to Germany as a test case and utilize data from the German Microcensus and ALLBUS studies. The findings indicate that the RRA principle actually provides a partial explanation of educational upward mobility and also accounts for substantial parts of the changes in inequality in educational attainment.