Human Capital and the Lifetime Costs of Impatience
American Economic Journal: Economic Policy
vol. 7,
no. 3, August 2015
(pp. 126-53)
(Complimentary)
Abstract
In this paper, we examine the role of impatience in human capital formation—arguably the most important investment decision individuals make during their lifetimes. We focus on a set of investment behaviors that cannot be explained solely by variation in exponential discounting. Using data from the NL SY and a straightforward measure of impatience, we find that impatient people more frequently invest in dynamically inconsistent ways, such as dropping out of college with one year or less remaining. The cumulative investment differences result in the impatient earning 13 percent less and expressing more regret as this cohort reaches middle age. (JEL D91, I26, J24, J31)Citation
Cadena, Brian C., and Benjamin J. Keys. 2015. "Human Capital and the Lifetime Costs of Impatience." American Economic Journal: Economic Policy, 7 (3): 126-53. DOI: 10.1257/pol.20130081Additional Materials
JEL Classification
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- I26 Returns to Education
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
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