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Human Capital Investment by the Poor: Informing Policy with Laboratory and Field Experiments

Author

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  • Catherine Eckel
  • Cathleen Johnson
  • Claude Montmarquette

Abstract

The purpose of the study is to collect information that can be used to design a policy to induce the poor to invest in human capital. We use laboratory experimental methodology to measure the preferences and choices of the target population of a proposed government policy. We recruited 256 subjects in Montreal, Canada; 72 percent had income below 120 percent of the Canadian poverty level. The combination of survey measures and actual decisions allows us to better understand individual heterogeneity in responses to different subsidy levels. Two behavioral characteristics, patience and attitude towards risk, are key to understanding the determinants of educational investment for the low-income individuals in this experiment. The decision to save for a family member's education is somewhat different from that of investing in one's own education. Again, patient participants were more likely to save for a family member's education, but in contrast to investing in one's own education, a subject's attitude towards risk played no role. Le but de cette étude est de recueillir des informations pour concevoir une politique publique afin d'inciter les pauvres à investir en capital humain. Nous utilisons l'approche expérimentale pour mesurer les préférences et les choix de la population ciblée. Nous avons recruté 256 sujets à Montréal. 72 % avaient un revenu inférieur à 120 % pour cent du seuil de faible revenu de Statistique Canada. La combinaison de mesures d'enquête et les décisions réelles nous permettent de mieux comprendre l'hétérogénéité individuelle dans les réponses aux différents niveaux de subvention. Deux caractéristiques comportementales, la patience (désir d'épargne) et l'attitude envers le risque, sont essentielles à la compréhension des déterminants de l'investissement éducatif pour les personnes à faible revenu dans cette expérience. La décision d'investir dans l'éducation d'un membre de la famille est quelque peu différente de celle d'investir dans sa propre éducation. Encore une fois, les participants les plus patients sont les plus susceptibles d'épargner pour l'éducation d'un membre de la famille, mais au contraire, investir dans sa propre éducation, l'attitude d'un sujet vis-à-vis le risque ne joue aucun rôle.

Suggested Citation

  • Catherine Eckel & Cathleen Johnson & Claude Montmarquette, 2010. "Human Capital Investment by the Poor: Informing Policy with Laboratory and Field Experiments," CIRANO Working Papers 2010s-33, CIRANO.
  • Handle: RePEc:cir:cirwor:2010s-33
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    File URL: http://www.cirano.qc.ca/files/publications/2010s-33.pdf
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    References listed on IDEAS

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    1. Bossert W., 1996. "Redistribution mechanisms based on individual characteristics," Mathematical Social Sciences, Elsevier, vol. 31(1), pages 51-51, February.
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    5. Nicholas Stern, 2008. "The Economics of Climate Change," American Economic Review, American Economic Association, vol. 98(2), pages 1-37, May.
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    Cited by:

    1. Jordan, Jeffrey L. & Castillio, Marco & Ferraro, Paul J. & Petrie, Regan, 2008. "Estimating Child Time Preferences: Aiding Rural Schools in Improving Human Capital Formation," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6368, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Carlsson, Fredrik & He, Haoran & Martinsson, Peter & Qin, Ping & Sutter, Matthias, 2012. "Household decision making in rural China: Using experiments to estimate the influences of spouses," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 525-536.
    3. Jordan, Jeffrey L. & Anil, Bulent & Herbert, Velma & Chatterjee, Swan, 2009. "Human Capital Investments in Education and Home Stability: Exploring Education, Homeownership and Poverty," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49320, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Intertemporal choice; field experiments; risk attitudes; working poor; choix intertemporels; expériences sur le terrain; les attitudes vis-à-vis le risque; travailleurs pauvres;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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