Human Capital and the Lifetime Costs of Impatience

49 Pages Posted: 10 Sep 2010 Last revised: 19 Sep 2012

See all articles by Brian C. Cadena

Brian C. Cadena

University of Colorado at Boulder - Department of Economics

Benjamin J. Keys

The Wharton School - University of Pennsylvania, Real Estate Department

Date Written: August 10, 2012

Abstract

In this paper, we examine the role of impatience in the formation of human capital - arguably the most important investment decision individuals make during their lifetimes. We pay particular attention to a set of investment behaviors that cannot be explained solely by variation in exponential discount rates. Using data from the NLSY and a straightforward measure of impatience, we find that impatient people systematically acquire lower levels of multiple measures of human capital and that a substantial fraction of these differences arise from dynamically inconsistent behavior, such as starting an educational program but failing to complete it. the cumulative investment differences result in the impatient earning 18 percent less and expressing significantly more regret as this cohort reaches middle age.

Keywords: impatience, human capital, educational attainment, time discounting

JEL Classification: D03, D91, I21, J24

Suggested Citation

Cadena, Brian C. and Keys, Benjamin J., Human Capital and the Lifetime Costs of Impatience (August 10, 2012). Available at SSRN: https://ssrn.com/abstract=1674068 or http://dx.doi.org/10.2139/ssrn.1674068

Brian C. Cadena (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
3034927908 (Phone)

HOME PAGE: http://spot.colorado.edu/~cadenab/Home.html

Benjamin J. Keys

The Wharton School - University of Pennsylvania, Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States

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