The Risk and Return of Human Capital Investments

Kristian Koerselman, Roope Uusitalo

    Research output: Contribution to journalArticleScientificpeer-review

    18 Citations (Scopus)


    Human capital investments increase lifetime income, but may involve substantial risk. In this paper we use a Finnish panel spanning 22 years to nonparametrically predict the mean, the variance and the skew of the present value of lifetime income, and to calculate certainty equivalent lifetime income at different levels of education. We find that university education is associated with about a half a million euro increase in discounted lifetime disposable income compared to vocational high school. Accounting for risk does little to change this picture. By contrast, vocational high school is associated with only moderately higher lifetime income compared to compulsory education, and the entire difference is due to differential nonemployment.
    Original languageUndefined/Unknown
    Pages (from-to)154–163
    JournalLabour Economics
    Issue numberOctober 2014
    Publication statusPublished - 2014
    MoE publication typeA1 Journal article-refereed

    Cite this