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Local Signals in a Global Tournament:Information Frictions, Optimism, and College Completion

Author

Listed:
  • Zach Weingarten

    (University of Pennsylvania)

  • Jere R. Behrman

    (University of Pennsylvania)

  • Andrew Postlewaite

    (University of Pennsylvania)

Abstract

Families frequently receive local signals about children’s skills, such as class rank in high school, yet the college market in which most students ultimately compete is much broader. Using nationally representative data, we show that student effort, parental investment, and beliefs about college degree attainment all respond predominantly to local ranks as opposed to global ranks, despite both strongly predicting college completion. We develop and estimate a dynamic model separating optimistic beliefs, information frictions, and peer interactions. Counterfactual-policy experiments show that more precise information, provided sufficiently early, raises skill accumulation and college completion. Eliminating optimism has the opposite effects on all outcomes.Length: 76 pages

Suggested Citation

  • Zach Weingarten & Jere R. Behrman & Andrew Postlewaite, 2026. "Local Signals in a Global Tournament:Information Frictions, Optimism, and College Completion," PIER Working Paper Archive 26-012, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:26-012
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    References listed on IDEAS

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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
    • I20 - Health, Education, and Welfare - - Education - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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