Advanced Search
MyIDEAS: Login

Educational Choices, Subjective Expectations, and Credit Constraints

Contents:

Author Info

  • Orazio Attanasio
  • Katja Kaufmann

Abstract

In this paper we analyze the link between people's "subjective" expectations of returns to schooling and their decision to invest into schooling. We use data from a household survey on Mexican junior and senior high school graduates that elicits their own and their parents' beliefs about future earnings for different scenarios of highest schooling degree. These data allow us to derive measures of expected idiosyncratic returns to schooling as well as measures of individual risk perceptions of earnings and unemployment risk. Therefore we can analyze for two important school attendance decisions, high school and college, whether parents' or youths' expectations matter and whether expected returns or risk perceptions are important for these two decisions. We find that both youths' and parents' expectations matter in terms of the high school attendance decision, while for the college attendance decision the youths' expectations appear to be the relevant ones. These results suggest that youths play an important role in the intra-family decision process about human capital investments. While often neglected in the literature, risk perceptions are important predictors for high school attendance decisions. College attendance decisions on the other hand depend on expected returns to college. Making use of our data on subjective expectations, we provide evidence on the existence of credit constraints based on the argument that credit constraints would break the link between expected returns (or risk perceptions) and schooling decisions. Our results point towards an important role of credit constraints in college attendance decisions and thus provide one explanation for the large inequalities that can be found in particular in higher education in Mexico.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w15087.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15087.

as in new window
Length:
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:nbr:nberwo:15087

Note: EFG
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. McKenzie, David & Gibson, John & Stillman, Steven, 2007. "A Land of Milk and Honey with Streets Paved with Gold: Do Emigrants Have Over-Optimistic Expectations about Incomes Abroad?," IZA Discussion Papers 2788, Institute for the Study of Labor (IZA).
  2. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  3. Christian Belzil & Jörgen Hansen, 2002. "Earnings Dispersion, Risk Aversion and Education," CIRANO Working Papers 2002s-20, CIRANO.
  4. Julian R. Betts, 1996. "What Do Students Know about Wages? Evidence from a Survey of Undergraduates," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 27-56.
  5. Jeff Dominitz & Charles F. Manski, 1996. "Eliciting Student Expectations of the Returns to Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 1-26.
  6. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post--secondary Schooling," Economic Journal, Royal Economic Society, vol. 112(482), pages 705-734, October.
  7. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects and Econometric Policy Evaluation," NBER Technical Working Papers 0306, National Bureau of Economic Research, Inc.
  8. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  9. Mario Padula & Luigi Pistaferri, 2001. "Education, Employment and Wage Risk," CSEF Working Papers 67, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  10. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-53, April.
  11. Delavande, Adeline & Giné, Xavier & McKenzie, David, 2011. "Measuring subjective expectations in developing countries: A critical review and new evidence," Journal of Development Economics, Elsevier, vol. 94(2), pages 151-163, March.
  12. Dauphin, Anyck & El Lahga, AbdelRahmen & Fortin, Bernard & Lacroix, Guy, 2008. "Are Children Decision-Makers Within the Household?," IZA Discussion Papers 3728, Institute for the Study of Labor (IZA).
  13. Katja Maria Kaufmann, 2010. "Understanding the Income Gradient in College Attendance in Mexico: The Role of Heterogeneity in Expected Returns," Working Papers 362, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  14. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  15. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
  16. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:15087. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.