Do Preferences and Biases Predict Life Outcomes? Evidence from Education and Labor Market Entry Decisions

48 Pages Posted: 22 Jan 2018

See all articles by Uschi Backes-Gellner

Uschi Backes-Gellner

University of Zurich - Institute for Business Administration; Swiss Leading House

Holger Herz

University of Fribourg - Department of Economics

Michael Kosfeld

Goethe University Frankfurt; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); University of Bonn - Center for Development Research (ZEF)

Yvonne Oswald

University of Zurich - Economics of Education, Firm Behaviour and Training Policies; University of Zurich - Department of Business Administration (IBW)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2018

Abstract

Evidence suggests that acquiring human capital is related to better life outcomes, yet young peoples' decisions to invest in or stop acquiring human capital are still poorly understood. We investigate the role of time and reference-dependent preferences in such decisions. Using a data set that is unique in its combination of real-world observations on student outcomes and experimental data on economic preferences, we find that a low degree of long-run patience is a key determinant of dropping out of upper-secondary education. Further, for students who finish education we show that one month before termination of their program, present-biased students are less likely to have concrete continuation plans while loss averse students are more likely to have a definite job offer already. Our findings provide fresh evidence on students' decision-making about human capital acquisition and labor market transition with important implications for education and labor market policy.

Keywords: dropout, economic preferences, education, Human Capital, job search

JEL Classification: D01, D03, D91, I21, J64

Suggested Citation

Backes-Gellner, Uschi and Herz, Holger and Kosfeld, Michael and Oswald, Yvonne, Do Preferences and Biases Predict Life Outcomes? Evidence from Education and Labor Market Entry Decisions (January 2018). CEPR Discussion Paper No. DP12609. Available at SSRN: https://ssrn.com/abstract=3106813

Uschi Backes-Gellner (Contact Author)

University of Zurich - Institute for Business Administration ( email )

Plattenstrasse 14
8032 Zurich
Switzerland
+41 44 6344281 (Phone)
+41 44 6344370 (Fax)

Swiss Leading House ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

Holger Herz

University of Fribourg - Department of Economics ( email )

Fribourg
Switzerland

Michael Kosfeld

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

Yvonne Oswald

University of Zurich - Economics of Education, Firm Behaviour and Training Policies ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

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