Relative risk aversion models: How plausible are their assumptions?

Abstract

This work examines the validity of the two main assumptions of relative risk-aversion models of educational inequality. We compare the Breen-Goldthorpe (BG) and the Breen-Yaish (BY) models in terms of their assumptions about status maintenance motives and beliefs about the occupational risks associated with educational decisions. Concerning the first assumption, our contribution is threefold. First, we criticise the assumption of the BG model that families aim only at avoiding downward mobility and are insensitive to the prospects of upward mobility. We argue that the loss-aversion assumption proposed by BY is a more realistic formulation of status-maintenance motives. Second, we propose and implement a novel empirical approach to assess the validity of the loss-aversion assumption. Third, we present empirical results based on a sample of families of lower secondary school leavers indicating that families are sensitive to the prospects of both upward and downward mobility, and that the loss-aversion hypothesis of BY is empirically supported. As regards the risky choice assumption, we argue that families may not believe that more ambitious educational options entail occupational risks relative to less ambitious ones. We present empirical evidence indicating that, in France, the academic path is not perceived as a risky option. We conclude that, if the restrictive assumptions of the BG model are removed, relative-risk aversion needs not drive educational inequalities.

Parental time preferences and educational choices: The role of children’s gender and of social origin

“…As noted by Breen and Yaish (2006), this could affect the rationality of educational decisions in precisely the direction that we are exploring in the paper: families with more time discounting preferences would naturally be more persuaded by the type of educational choices yielding rapid results in the short-term, even if their advantage wanes or diminishes in the long term (Breen & Yaish 2006). This would also be in line with Barone et al’s (2021) suggestion that the risky choice assumption of the RRA model of educational decision-making is more realistic for explaining track choices than ‘vertical continuation decisions’.…”

“…Other formulations of RRA have been critical regarding the strict assumptions formulated by Breen and Goldthorpe (see Barone et al, 2021). For instance, Breen and Yaish (2006) do not consider the avoidance of downward mobility as the only driver of educational decisions, just the main one.…”

“…Families are also sensitive to prospective gains. In their revision of these two models (Breen and Goldthorpe/Breen and Yaish), Barone et al (2021) arrive at the conclusion that the Breen and Yaish model is more realistic, implying that educational inequalities may be also rooted in ‘the specific patterns of beliefs of families about returns to education’ (Barone et al, 2021: 168). In other words, beliefs or individual traits may become moderators of the relationship between social origin and educational decisions, and this is also the case for time discounting preferences.…”

“…Although RRA has been already tested for the study of the relationship between social origins and children’s educational choices (e.g. Need and De Jong 2001; Davies et al, 2002; Breen and Yaish 2006), to the best of our knowledge, the model’s assumptions and mechanisms have received less attention (exceptions include Stocké, 2007; Van de Werfhorst and Hofstede 2007; Barone et al, 2018; Barone et al, 2021). Here, we use RRA theoretical framework to study the secondary effects of social origin on educational attainment (Boudon 1974), offering a more complex analysis on how social background is linked to gender in educational attainment.…”

The rise of income and the demise of class and social status? A systematic review of measures of socio-economic position in stratification research

“…Interestingly, popular sociological theories causally explaining intergenerational attainment explicitly resort to class but not income differences (Breen and Goldthorpe 1997;Goldthorpe 2007a;Barone, Barg and Ichou 2021). Moreover, mobility scholars argue that intergenerational effects resulting from social class are not reducible to those stemming from family income differences, even if earnings are the outcome measures (Mood 2017).…”