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Learning About Academic Ability and the College Drop-Out Decision

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We use unique data to examine how college students from low income families form expectations about academic ability and to examine the role that learning about ability and a variety of other factors play in the college drop-out decision. From the standpoint of satisfying a central implication from the theory of dropout,we find that self-reported expectations data perform well relative to standard assumptions employed in empirical work when it is necessary to explicitly characterize beliefs. At the time of entrance, students tend to substantially discount the possibility of bad grade performance, with this finding having implications for understanding the importance of the option value of schooling. After entrance, students update their beliefs in a manner which takes into account both initial beliefs and new information, with heterogeneity in weighting being broadly consistent with the spirit of Bayesian updating. Learning about ability plays a very prominent role in the drop-out decision. Among other possible factors of importance, while students who find school to be unenjoyable are unconditionally much more likely to leave school, this effect arises to a large extent because these students also tend to receive poor grades. We end by examining whether students whose grades are lower than expected understand the underlying reasons for their poor grade performance.

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Paper provided by University of Western Ontario, CIBC Centre for Human Capital and Productivity in its series University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers with number 20086.

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Date of creation: 2008
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Handle: RePEc:uwo:hcuwoc:20086

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Postal: CIBC Centre for Human Capital and Productivity, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/cibc_workingpapers.html

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  1. Lance Lochner, 2005. "Individual Perceptions of the Criminal Justice System," 2005 Meeting Papers 452, Society for Economic Dynamics.
  2. Adeline Delavande, 2008. "Pill, Patch, Or Shot? Subjective Expectations And Birth Control Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 999-1042, 08.
  3. J. Dominitz & C. F. Manski, . "Using expectations data to study subjective income expectations," Institute for Research on Poverty Discussion Papers 1050-94, University of Wisconsin Institute for Research on Poverty.
  4. Stinebrickner, Ralph & Stinebrickner, T.R.Todd R., 2004. "Time-use and college outcomes," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 243-269.
  5. Carneiro, Pedro & Hansen, Karsten & Heckman, James, 2003. "Estimating distributions of treatment effects with an application to the returns to schooling and measurement of the effects of uncertainty on college choice," Working Paper Series 2003:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  6. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, Elsevier.
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  8. Heckman, James J. & Navarro, Salvador, 2007. "Dynamic discrete choice and dynamic treatment effects," Journal of Econometrics, Elsevier, vol. 136(2), pages 341-396, February.
  9. Todd R. Stinebrickner & Ralph Stinebrickner, 2007. "The Effect of Credit Constraints on the College Drop-Out Decision A Direct Approach Using a New Panel Study," NBER Working Papers 13340, National Bureau of Economic Research, Inc.
  10. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August.
  11. van der Klaauw, Wilbert & Wolpin, Kenneth I., 2008. "Social security and the retirement and savings behavior of low-income households," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 21-42, July.
  12. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 48-83, January.
  13. Jeff Dominitz & Charles F. Manski, 1994. "Eliciting Student Expectations of the Returns to Schooling," NBER Working Papers 4936, National Bureau of Economic Research, Inc.
  14. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  15. F. Thomas Juster, 1966. "Consumer Buying Intentions and Purchase Probability: An Experiment in Survey Design," NBER Books, National Bureau of Economic Research, Inc, number just66-2, July.
  16. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  17. Jeff Dominitz & Charles F. Manski, 2003. "How Should We Measure Consumer Confidence (Sentiment)? Evidence from the Michigan Survey of Consumers," NBER Working Papers 9926, National Bureau of Economic Research, Inc.
  18. Jeff Dominitz & Charles F. Manski, 2004. "How Should We Measure Consumer Confidence?," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 51-66, Spring.
  19. Todd Stinebrickner & Ralph Stinebrickner, 2001. "Understanding Educational Outcomes of Students from Low Income Families: Evidence from a Liberal Arts College with a Full Tuition Subsidy Program," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20014, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
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