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How much does schooling disutility matter?

Guanyi Yang and Ben Casner

Research in Economics, 2021, vol. 75, issue 1, 87-95

Abstract: Studies on structural education choice models are often inconsistent in choosing whether and how to include a disutility of education, especially in an environment with risk and wealth inequality. We show that adding a disutility term to the education decision, a human capital investment option, is equivalent to assuming a relationship between wealth, risk, and education. Utility gain from education is increasing in the riskiness of future consumption. A riskier environment further propels an agent to choose the human capital investment option that maximizes future income. If the degree of risk increases heterogeneously across multiple human capital investment options, risk aversion and the precautionary savings motive can compound or negate each other depending on which option has a greater increase in risk.

Keywords: Structural estimation; Human capital theory; Disutility of schooling; Education choices; Precautionary saving; Risk (search for similar items in EconPapers)
JEL-codes: D11 I2 J24 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.rie.2020.11.004

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