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Subjective beliefs and Schooling Decisions

Author

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  • Christian Belzil

    (GATE - Groupe d'analyse et de théorie économique - UL2 - Université Lumière - Lyon 2 - ENS LSH - Ecole Normale Supérieure-Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper considers the estimation of sequential schooling decisions made by agents who are endowed with subjective beliefs about their own ability. I use unique Italian panel data which provide information on i) the curvature of the per-period utility function, ii) schooling decisions, iii) post-schooling earnings, in order to estimate the future component of the differences in intertemporal utilities of school and work independently from the present component, (as in Geweke and Keane, 1995, 2001), and evaluate the importance of "present bias". Under certain conditions, which include imposing equality between the modal belief and true ability, I recover individual specific subjective probability distributions. I estimate both the degree of confidence (a measure of spread) and the incidence of over (and under) estimation. I find that the future component of intertemporal utilities dominates schooling decisions. I find a strong incidence of under-estimation among the more able and a much smaller incidence of over-estimation among the low ability group. At the medium ability spectrum, there is evidence of some over-estimation. The degree of confidence is high and imply that agents have a substantial amount of inside information (36% of the population act on a degenerate subjective distribution). Overall, the variance of the objective ability heterogeneity distribution is 4 times as large the variance of the distribution characterizing subjective beliefs.
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Suggested Citation

  • Christian Belzil, 2006. "Subjective beliefs and Schooling Decisions," Post-Print halshs-00265468, HAL.
    • Handle: RePEc:hal:journl:halshs-00265468
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    Cited by:

    1. Filippin, Antonio & Paccagnella, Marco, 2012. "Family background, self-confidence and economic outcomes," Economics of Education Review, Elsevier, vol. 31(5), pages 824-834.
    2. Wölfel, Oliver & Heineck, Guido, 2012. "Parental risk attitudes and children's secondary school track choice," Economics of Education Review, Elsevier, vol. 31(5), pages 727-743.
    3. Belzil, Christian & Leonardi, Marco, 2007. "Can risk aversion explain schooling attainments? Evidence from Italy," Labour Economics, Elsevier, vol. 14(6), pages 957-970, December.
    4. Belzil, Christian, 2007. "The return to schooling in structural dynamic models: a survey," European Economic Review, Elsevier, vol. 51(5), pages 1059-1105, July.
    5. Christian Belzil & Marco Leonardi, 2013. "Risk Aversion and Schooling Decisions," Annals of Economics and Statistics, GENES, issue 111-112, pages 35-70.

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    Keywords

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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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