Risk Preferences Across Public and Private Sector Employees: Evidence From Mortgage Choices

Abstract

Public sector employees have long been considered to be more risk-averse when compared with their private sector counterparts. Using data from mortgage applications, we offer novel evidence that casts doubt on this conventional view. After accounting for differences in applicants' demographic and creditworthiness characteristics, we find little, to no, differences between public and private sector employees in terms of their risky mortgage choices. The findings are robust to accounting for potential bias from unobservables and testing alternative measures of mortgage riskiness.

Keywords: Risk Preferences, Public Sector

JEL Classification: H83, J45, M59