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Do Preferences and Biases predict Life Outcomes? Evidence from Education and Labor Market Entry Decisions

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  • Backes-Gellner, Uschi
  • Herz, Holger
  • Kosfeld, Michael
  • Oswald, Yvonne

Abstract

Evidence suggests that acquiring human capital is related to better life outcomes, yet young peoples' decisions to invest in or stop acquiring human capital are still poorly understood. We investigate the role of time and reference-dependent preferences in such decisions. Using a data set that is unique in its combination of real-world observations on student outcomes and experimental data on economic preferences, we find that a low degree of long-run patience is a key determinant of dropping out of upper-secondary education. Further, for students who finish education we show that one month before termination of their program, present-biased students are less likely to have concrete continuation plans while loss averse students are more likely to have a definite job offer already. Our findings provide fresh evidence on students' decision-making about human capital acquisition and labor market transition with important implications for education and labor market policy.

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  • Backes-Gellner, Uschi & Herz, Holger & Kosfeld, Michael & Oswald, Yvonne, 2018. "Do Preferences and Biases predict Life Outcomes? Evidence from Education and Labor Market Entry Decisions," CEPR Discussion Papers 12609, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12609
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    Cited by:

    1. Gill, Andrej & Hett, Florian & Tischer, Johannes, 2022. "Time inconsistency and overdraft use: Evidence from transaction data and behavioral measurement experiments," Discussion Papers 18/2022, Deutsche Bundesbank.
    2. Thomas Epper & Ernst Fehr & Helga Fehr-Duda & Claus Thustrup Kreiner & David Dreyer Lassen & Søren Leth-Petersen & Gregers Nytoft Rasmussen, 2020. "Time Discounting and Wealth Inequality," American Economic Review, American Economic Association, vol. 110(4), pages 1177-1205, April.
    3. Angerer, Silvia & Bolvashenkova, Jana & Glätzle-Rützler, Daniela & Lergetporer, Philipp & Sutter, Matthias, 2021. "Children's Patience and School-Track Choices Several Years Later: Linking Experimental and Field Data," IZA Discussion Papers 14401, Institute of Labor Economics (IZA).
    4. Guido Friebel & Michael Kosfeld & Gerd Thielmann, 2019. "Trust the Police? Self-Selection of Motivated Agents into the German Police Force," American Economic Journal: Microeconomics, American Economic Association, vol. 11(4), pages 59-78, November.
    5. Silvia Angerer & Jana Bolvashenkova & Daniela Glätzle-Rützler & Philipp Lergetporer & Matthias Sutter, 2021. "Children’s patience and school-track choices several years later: Linking experimental and field data," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2021_12, Max Planck Institute for Research on Collective Goods.
    6. Andrej Gill & Florian Hett & Johannes Tischer, 2022. "Time Inconsistency and Overdraft Use: Evidence from Transaction Data and Behavioral Measurement Experiments," Working Papers 2205, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    7. Gill, Andrej & Hett, Florian & Tischer, Johannes, 2022. "Time inconsistency and overdraft use: Evidence from transaction data and behavioral measurement experiments," SAFE Working Paper Series 347, Leibniz Institute for Financial Research SAFE.
    8. Inhwa Kim & Keith J. Gamble, 2022. "Too much or too little information: how unknown uncertainty fuels time inconsistency," SN Business & Economics, Springer, vol. 2(2), pages 1-33, February.
    9. Eva Berger, 2020. "Self-productivity and Cross-productivity in the Process of Skill Formation," Working Papers 2027, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.

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    More about this item

    Keywords

    dropout; economic preferences; education; Human Capital; job search;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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