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

Uschi Backes-Gellner, Holger Herz, Michael Kosfeld () and Yvonne Oswald

No 6863, CESifo Working Paper Series from CESifo Group Munich

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: economic preferences; education; dropout; human capital; job search (search for similar items in EconPapers)
JEL-codes: D01 D03 D91 I21 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu, nep-hrm, nep-lab and nep-upt
Date: 2018
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Working Paper: Do Preferences and Biases predict Life Outcomes? Evidence from Education and Labor Market Entry Decisions (2018) Downloads
Working Paper: Do Preferences and Biases predict Life Outcomes? Evidence from Education and Labor Market Entry Decisions (2018) Downloads
Working Paper: Do Preferences and Biases Predict Life Outcomes? Evidence from Education and Labor Market Entry Decisions (2018) Downloads
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