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Economic Preferences Predict Higher Education Choices

Author

Listed:
  • Thomas F. Epper

    (Department of Economics, University of Copenhagen, IESEG School of Management, University Lille)

  • Ernst Fehr

    (Department of Economics, University of Copenhagen, Department of Economics, University of Zürich)

  • Kristoffer B. Hvidberg

    (Department of Economics, University of Copenhagen,)

  • Claus T. Kreiner

    (Department of Economics, University of Copenhagen)

  • Søren Leth-Petersen

    (Department of Economics, University of Copenhagen)

  • Basit Zafar

    (Department of Economics, University of Michigan)

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, programspecific 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," CEBI working paper series 26-18, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2618
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    File URL: https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_18-26.pdf
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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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