EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

Full metadata record

DC FieldValueLanguage
dc.contributor.authorBelzil, Christianen_US
dc.contributor.authorHansen, Joergenen_US
dc.description.abstractWe estimate a Dynamic Programming model of the decision between continuing schooling or entering the labor market using a panel from the National Longitudinal Survey (NLSY). The model, set in an expected utility framework (with a power utility function), fits data on both schooling attainments and wage very well. We find a degree of relative risk aversion much smaller than usually found in the finance literature (around 0.6) and a subjective annual discount rate between 4\% and 5\%. Various simulations indicate that schooling attainments are elastic with respect to the return to college education and, to a lesser extent, with respect to measured ability (Armed Forces Qualification Test scores) but inelastic with respect to household characteristics (especially household income). The ``true'' intergenerational correlation between schooling attainments and parents' education (after conditioning on observed and unobserved ability) is found to be quite low. Finally, our estimates of the return to schooling indicate strong returns to high school graduation and a clear evidence of a positive correlation between the utility of attending school and unobserved labor market ability (ability bias). Estimates of the return to schooling which take into account the ability bias are found to be between 25% and 30% smaller than those obtained ignoring it.en_US
dc.publisherInstitute for the Study of Labor (IZA) Bonnen_US
dc.relation.ispartofseriesIZA Discussion paper series 43en_US
dc.subject.keywordDynamic Programmingen_US
dc.subject.keywordReturns to Educationen_US
dc.subject.keywordRisk Aversionen_US
dc.subject.keywordRate of Time Preferenceen_US
dc.titleHousehold Characteristics, Ability and Education: Evidence´ from a Dynamic Expected Utility Modelen_US
dc.typeWorking Paperen_US
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
dp43.pdf249.88 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.