Article

Evidence of lower risk tolerance among public sector employees in their personal financial matters

Journal of Occupational and Organizational Psychology 05/2009; 82(2):453 - 463. DOI: 10.1348/096317908X337725

ABSTRACT Critics claim that excessive risk avoidance is characteristic of public sector workers. To test this contention, the financial risk tolerance scores of public sector and private sector employees who had used financial planning services were compared on a financial risk tolerance scale. Public sector employees scored lower on financial risk tolerance relative to private sector employees. Differences remained even after controlling for other variables linked to risk tolerance.

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    ABSTRACT: We assess whether public sector employees have a stronger inclination to serve others and are more risk averse than employees in the private sector. A unique feature of our study is that we use revealed rather than stated preferences data. Respondents of a large-scale survey were offered a substantial reward and could choose between a widely redeemable gift certificate, a lottery ticket, or making a donation to a charity. Our analysis shows that public sector employees are significantly less likely to choose the risky option (lottery) and, at the start of their career, significantly more likely to choose the pro-social option (charity). However, when tenure increases, this difference in pro-social inclinations disappears and, later on, even reverses. Our results further suggest that quite a few public sector employees do not contribute to charity because they feel that they already contribute enough to society at work for too little pay.
    Journal of Economic Behavior & Organization 01/2009; · 1.01 Impact Factor

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