Educational Choices, Subjective Expectations, and Credit Constraints. NBER Working Paper No. 15087.

By O. Attanasio, K. Kaufmann. 2009

177 citations recorded by the source corpus.

In this paper we analyze the link between people's "subjective" expectations of returns to schooling and their decision to invest into schooling. We use data from a household survey on Mexican junior and senior high school graduates that elicits their own and their parents' beliefs about future earnings for different scenarios of highest schooling degree. These data allow us to derive measures of expected idiosyncratic returns to schooling as well as measures of individual risk perceptions of earnings and unemployment risk. Therefore we can analyze for two important school attendance decisions, high school and college, whether parents' or youths' expectations matter and whether expected returns or risk perceptions are important for these two decisions. We find that both youths' and parents' expectations matter in terms of the high school attendance decision, while for the college attendance decision the youths' expectations appear to be the relevant ones. These results suggest that youths play an important role in the intra-family decision process about human capital investments. While often neglected in the literature, risk perceptions are important predictors for high school attendance decisions. College attendance decisions on the other hand depend on expected returns to college. Making use of our data on subjective expectations, we provide evidence on the existence of credit constraints based on the argument that credit constraints would break the link between expected returns (or risk perceptions) and schooling decisions. Our results point towards an important role of credit constraints in college attendance decisions and thus provide one explanation for the large inequalities that can be found in particular in higher education in Mexico.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/c3c137904dbd1f18412d32490ad8f837cf1ca492

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In Accounting

1. Lucas C. Coffman
2. Katja Kaufmann
3. Leonardo Bursztyn
4. O. Attanasio

In Economics and Econometrics

1. Lucas C. Coffman
2. Katja Kaufmann
3. Leonardo Bursztyn
4. O. Attanasio

Citations in the corpus

• Understanding the Income Gradient in College Attendance in Mexico: The Role of Heterogeneity in Expected Returns (2014, methodology): “Attanasio and Kaufmann (2007) compare the level of earnings expectations of Mexican high school graduates to the level of contemporaneous earnings realizations using Census data of the year 2000.”
• The Schooling Decision: Family Preferences, Intergenerational Conflict, and Moral Hazard in the Brazilian Favelas (2012, methodology): “Attanasio and Kaufmann (2009) use data from a Mexican household survey and provide evidence that mothers have significantly higher expectations on returns to high school than their children in junior high school do. Dinkelman and Martı́nez (2011) find significant decreases in absenteeism from provid”
• A Major in Science? Initial Beliefs and Final Outcomes for College Major and Dropout (2013, unknown): “Thus, our work is related to a literature which has begun to recognize the usefulness of expectations data in the education context (see, e.g., Attanasio and Kaufmann, 2009; Kaufmann, 2009; and Jensen, 2010) and a literature that has recognized the importance of understanding the process by which…”
• Field of Study, Earnings, and Self-Selection* (2016, unknown): “Willis and Rosen, 1979; Carneiro et al., 2011). To date, most of what we know about why individuals choose different fields of study comes from surveys or informational experiments. The evidence is mixed. Some studies suggest that students often base educational choices on limited or inaccurate info”
• Measuring Subjective Expectations in Developing Countries: A Critical Review and New Evidence (2009, unknown): “A relatedmethod of eliciting a distribution by directly asking about probabilities is found in Attanasio et al. (2005), who elicit income expectations in Colombia, and Attanasio and Kaufmann (2009) who elicit income expectations of junior high school students in Mexico.”
• Credit Access and College Enrollment (2017, unknown): “The rst column shows the results for all years together, while columns (2) to (4) show the results for each year from 2007 to 2009.”