Local Signals in a Global Tournament:Information Frictions, Optimism, and College Completion

Zach Weingarten (), Jere R. Behrman () and Andrew Postlewaite ()
Additional contact information
Zach Weingarten: University of Pennsylvania
Jere R. Behrman: University of Pennsylvania
Andrew Postlewaite: University of Pennsylvania

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: Families frequently receive local signals about children’s skills, such as class rank in high school, yet the college market in which most students ultimately compete is much broader. Using nationally representative data, we show that student effort, parental investment, and beliefs about college degree attainment all respond predominantly to local ranks as opposed to global ranks, despite both strongly predicting college completion. We develop and estimate a dynamic model separating optimistic beliefs, information frictions, and peer interactions. Counterfactual-policy experiments show that more precise information, provided sufficiently early, raises skill accumulation and college completion. Eliminating optimism has the opposite effects on all outcomes.Length: 76 pages

Keywords: Class Ranks; Information Frictions; Belief Distortions; Human-Capital Accumulation; Academic Competition (search for similar items in EconPapers)
JEL-codes: D83 D91 I20 J24 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2026
New Economics Papers: this item is included in nep-edu
References: Add references at CitEc
Citations:

Downloads: (external link)
https://economics.sas.upenn.edu/system/files/worki ... per%20Submission.pdf (application/pdf)

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:pen:papers:26-012

Access Statistics for this paper

More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator ().