Human Capital and the Lifetime Costs of Impatience

Brian Cadena and Benjamin Keys

American Economic Journal: Economic Policy, 2015, vol. 7, issue 3, 126-53

Abstract: In this paper, we examine the role of impatience in human capital formation—arguably the most important investment decision individuals make during their lifetimes. We focus on a set of investment behaviors that cannot be explained solely by variation in exponential discounting. Using data from the NL SY and a straightforward measure of impatience, we find that impatient people more frequently invest in dynamically inconsistent ways, such as dropping out of college with one year or less remaining. The cumulative investment differences result in the impatient earning 13 percent less and expressing more regret as this cohort reaches middle age. (JEL D91, I26, J24, J31)

JEL-codes: D91 I26 J24 J31 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/pol.20130081
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Citations: View citations in EconPapers (120)

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