Human Capital and the Lifetime Costs of Impatience
49 Pages Posted: 10 Sep 2010 Last revised: 19 Sep 2012
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: Suggested Citation
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