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Economic Preferences Predict Higher-Education Choices

Author

Listed:
  • Thomas F. Epper
  • Ernst Fehr
  • Kristoffer B. Hvidberg
  • Claus T. Kreiner
  • Søren Leth-Petersen
  • Basit Zafar

Abstract

We examine whether individual preferences predict higher education choices. According to standard human capital theory, differences in individuals’ time and risk preferences lead to differences in educational investments. Testing this hypothesis is challenging, as it requires measuring individuals’ preferences, doing so before they make educational investments, and subsequently observing their educational choices. We combine incentivized, experimentally elicited measures of time and risk preferences for a large, representative sample of 18–19-year-old Danes with administrative data on subsequent higher education choices, program-specific earnings trajectories, prior school performance, and family background. In line with theory, we find that more patient individuals choose longer education programs and programs with steeper early-career earnings profiles, while more risk-averse individuals select programs with lower earnings dispersion and reduced downside risk. These relationships remain strong after controlling for cognitive ability, prior academic performance, and family background. Our findings suggest that preferences have a substantial impact on real-world educational investments and have implications for educational sorting.

Suggested Citation

  • Thomas F. Epper & Ernst Fehr & Kristoffer B. Hvidberg & Claus T. Kreiner & Søren Leth-Petersen & Basit Zafar, 2026. "Economic Preferences Predict Higher-Education Choices," CESifo Working Paper Series 12954, CESifo.
    • Handle: RePEc:ces:ceswps:_12954
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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