Using Observed Choices to Infer Agent's Information: Reconsidering the Importance of Borrowing Constraints, Uncertainty and Preferences in College Attendance

Salvador Navarro

No 20118, University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers from University of Western Ontario, Centre for Human Capital and Productivity (CHCP)

Abstract: I use economic theory and estimates of a semiparametrically identified structural model to analyze the role played by credit constraints, uncertainty and preferences in explaining college attendance. A methodology for inferring information available to the agent from individual choices is proposed and implemented. The test distinguishes which of the unobserved (to the analyst) components of future outcomes are known to the agent and which are unknown to both at a given stage of the life cycle. I use microdata on earnings, schooling and consumption to infer the agent's information set and estimate a model of college choice and consumption under uncertainty with equilibrium borrowing constraints. I estimate that 80% and 44% of the variances of college and high school earnings respectively are predictable by the agent. Moving to a no tuition economy increases college attendance from 48% to 50%. When people are allowed to smooth consumption, college increases to nearly 58%. General equilibrium effects not withstanding, credit constraints have a larger effect than previously suggested.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=1070&context=economicscibc (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uwo:hcuwoc:20118

Ordering information: This working paper can be ordered from
https://economics.uw ... itting_ordering.html
The price is Paper copy available by mail at a cost of $10.00 Canadian each.

Access Statistics for this paper

More papers in University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers from University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Centre for Human Capital and Productivity (CHCP), Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2.
Bibliographic data for series maintained by ().