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Author Kaufmann, Katja Maria
Title Essays on the use of subjective expectations in the analysis of educational choices
book jacket
Descript 125 p
Note Source: Dissertation Abstracts International, Volume: 69-10, Section: A, page: 4073
Adviser: Luigi Pistaferri
Thesis (Ph.D.)--Stanford University, 2008
The goal of this dissertation is to improve our understanding of the main determinants of educational choices by using data on people's quantitative subjective expectations of future earnings for different potential schooling degrees. This endeavor is challenging because choices under uncertainty can arise from different combinations of expectations and preferences leading to a fundamental identification problem. For example, low college enrollment among the poor might be due to low expected returns to college. On the other hand, low enrollment might be caused by high costs of college, e.g. high borrowing costs for poor individuals without the means to pay college costs directly, high psychological costs or a high discount rate
Being able to separately identify low perceived (monetary) benefits and high costs of college attendance is crucial for implementing effective policies, while this task is complicated, because important components of both benefits and costs are unobserved. Conventional approaches rely on strong assumptions about people's information sets and the way people form expectations about their own future earnings. Eliciting people's subjective expectations allows relaxing these assumptions
In the first chapter of the dissertation I discuss under what conditions data on subjective expectations of earnings can improve our understanding of educational choices. I then analyze the validity of survey data on expectations of Mexican adolescents and show that expected returns to schooling and perceived earnings and employment risk are important determinants of educational decisions
In the second chapter I analyze the causes and welfare implications of low college enrollment among poor Mexicans. Data on subjective expectations of earnings enables me to show that poor individuals require higher expected returns to college to be induced to attend, implying that they face higher costs. To understand the role of different cost components, I test implications of a simple model of college attendance. I find that poor high-expected-return individuals are more responsive to changes in direct costs, which is consistent with the presence of liquidity constraints. I then use the model to simulate policy changes, such as the introduction of a student loan program, by applying the local instrumental variable approach by Heckman and Vytlacil. I find that individuals who would change their attendance in response to such policies have higher expected returns than those already attending. This suggests important potential welfare gains of such governmental programs
School code: 0212
Host Item Dissertation Abstracts International 69-10A
Subject Education, Sociology of
Economics, General
Economics, Labor
Alt Author Stanford University
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