Separating Uncertainty from Heterogeneity in Life Cycle Earnings

Cunha, Flávio; Heckman, James J.; Navarro, Salvador

doi:10.3386/w11024

Cited by 237 publications

(413 citation statements)

References 28 publications

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“…Even scarcer is the body of literature assessing the role that concerns about non predictable future returns play in the selection of education. This seems at odds with recent literature on risk in education (Cunha et al, 2005;Lemieux, 2006;Chen and Khan, 2007;Chen, 2008;Mazza and van Ophem, 2010) treating self-selection into education, motivated by risk concerns on the part of choice makers, as given. In this framework, self-selection might arise as a consequence of risk aversion.…”

Section: Introductionmentioning

confidence: 89%

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Does Risk Matter? A Semiparametric Model for Educational Choices in the Presence of Uncertainty

Mazza

2011

SSRN Journal

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Standard human capital theory suggests that individuals select into education in order to maximize their utility. If agents are risk averse, they select the educational level that minimizes future uncertainty. The possibility of self-selection complicates the identi cation of the causal contribution of education to uncertainty in future payo s. In this paper the assumption of endogenous school choices due to concerns about future risk is tested and the importance of uncertainty in shaping schooling choices is assessed. Relying on a exible semiparametric procedure allowing for self selection, bounds for the e ect of eld of study in college on uncertainty are estimated and, in a second stage, exploited for modeling schooling choices. The results of the empirical investigation do con rm that individuals self-select into education in order to minimize uncertainty and maximize returns. Only selection of Humanities type of majors is una ected by risk or expected returns.

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Section: Introductionmentioning

confidence: 89%

“…Surprisingly enough, empirical evidence on schooling choices under uncertainty is scarce at best (Altonji, 1993;Cunha et al, 2005;Zafar, 2011). Even scarcer is the body of literature assessing the role that concerns about non predictable future returns play in the selection of education.…”

Section: Introductionmentioning

confidence: 99%

Does Risk Matter? A Semiparametric Model for Educational Choices in the Presence of Uncertainty

Mazza

2011

SSRN Journal

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“…6 If provided schooling costs are tax deductible. 7 In figure 1 we consider the logarithm of income in order to draw income streams as linear curves.…”

Section: Entry-level Wagementioning

confidence: 99%

“…With each additional (successful) year of schooling the entry-level wage increases, and hence the level of the earnings stream rises (see the dotted line in figure 1). 7 However, even if another year of schooling can be expected 5 Recent empirical studies suggest that education costs are an important ingredient of the education decision (see e.g. Heckman (2008)).…”

Section: Entry-level Wagementioning

confidence: 99%

Stay in school or start working? — The human capital investment decision under uncertainty and irreversibility

2012

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Unlike other approaches we include accumulative schooling costs, and provide a full analytical discussion of all determinants of the decision to terminate education and enter the labor market. Further, as we are able to look at a sequence of formal qualification levels, each characterized by various cost and income profiles we can discuss discontinuities and sheepskin effects within this approach. Terms of use: Documents in EconStor mayJEL Code: J24, D81, I20.

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“…In particular, for a variety of dimensions of behavior and for many labor market outcomes, a change in noncognitive skills from the lowest to the highest level has an effect on behavior that is comparable to or greater than a corresponding change in cognitive skills. An emerging body of literature also finds that "psychic" costs explain a range of economic and social behavior (see, e.g., Carneiro, Hansen, and Heckman (2003), Carneiro and Heckman (2003), Cunha, Heckman and Navarro (2005), Heckman, Lochner and Todd (2006)). This is important because there are numerous settings that represent competitive situations that involve cognitive performance (e.g., test taking, student competition in schools, competitions for promotion in certain firms and organizations, and others).…”

Section: Introductionmentioning

confidence: 99%

Cognitive performance in competitive environments: Evidence from a natural experiment

González‐Díaz

Palacios‐Huerta

2016

Journal of Public Economics

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Competitive situations that involve cognitive performance are widespread in labor markets, schools, and organizations, including test taking, competition for promotion in firms, and others. This paper studies cognitive performance in a high-stakes competitive environment. The analysis takes advantage of a natural experiment which randomly allocates different emotional states across professional subjects competing in a cognitive task. The setting is a chess match where two players play an even number of chess games against each other alternating the color of the pieces. White pieces confer an advantage for winning a chess game and who starts the match with these pieces is randomly decided. We provide a theoretical model to guide the empirical analysis. The model shows that in this setting there is no rational reason why winning frequencies should be better than 50-50 in favor of the player drawing the white pieces in the first game. Yet, we find that observed frequencies are about 60-40. As predicted, we also find that psychological effects are stronger when the competing subjects are more similar in cognitive skills. We conclude that these elements affect cognitive performance in the face of experience, competition, and high stakes. * We thank

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Separating Uncertainty from Heterogeneity in Life Cycle Earnings

Cited by 237 publications

References 28 publications

Does Risk Matter? A Semiparametric Model for Educational Choices in the Presence of Uncertainty

Does Risk Matter? A Semiparametric Model for Educational Choices in the Presence of Uncertainty

Stay in school or start working? — The human capital investment decision under uncertainty and irreversibility

Cognitive performance in competitive environments: Evidence from a natural experiment

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