Expectations in Education: Framework, Elicitation, and Evidence

This paper reviews the economic literature on subjective expectations in education with a focus on high income countries. It begins with highlighting the motivations that prompted systematic survey elicitation and statistical analysis of youth's expectations of the returns to schooling and with tracing key milestones in the development of this research program. It then proceeds to reviewing the relevant body of research by organizing the discussion around four topics: (i) the analysis of the perceived monetary returns, risks, and costs of schooling; (ii) the analysis of the perceived nonmonetary returns, risks, and costs of schooling; (iii) the analysis of schooling decisions; (iv) the analysis of expectation formation and learning. For each topic, the paper provides: (a) a motivating analytical framework; (b) a methodological discussion of expectations elicitation and a survey of data collections; (c) a review of the empirical evidence. Avenues for future research are discussed in the conclusion.