Abstract
We analyze the implication of time-inconsistent preferences in educational decision making and corresponding policies using a structural dynamic choice model. We make two important research contributions. First, we estimate our model using data from the German Socioeconomic Panel (soep) and provide quantitative evidence for time-inconsistent behavior in educational decision making. Second, we evaluate the relevance of time-inconsistent behavior for the effectiveness of education policies. For this purpose, we simulate policies where time preferences may play an important role: (1) an increase in the state grant for students as a way to affect short-term costs while at school and (2) an increase in the state grant as a loan that must be paid back after education is completed. We find substantial differences in the educational outcomes when comparing them to the outcomes based on a model specification with exponential discounting. Hence, the common assumption of exponential discounting in educational decisions may be too restrictive.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.