Present Bias and Underinvestment in Education? Long-Run Effects of Childhood Exposure to Booms in Colombia
Journal of Labor Economics, Forthcoming
81 Pages Posted: 9 Apr 2019 Last revised: 16 Apr 2020
There are 2 versions of this paper
Present Bias and Underinvestment in Education? Long-Run Effects of Childhood Exposure to Booms in Colombia
Present Bias and Underinvestment in Education? Long-run Effects of Childhood Exposure to Booms in Colombia
Date Written: July 23, 2019
Abstract
This paper examines the long-run impacts of income shocks by exploiting variation in coffee cultivation patterns within Colombia and world coffee prices during cohorts’ school-going years in a differences-in-differences framework. The results indicate that cohorts who faced higher returns to coffee-related work during school-going years completed fewer years of schooling and have lower income in adulthood. These findings suggest that leaving school during temporary booms results in a significant loss of long-term income. This is consistent with the possibility that students may ignore or heavily discount the future consequences of dropout decisions when faced with immediate income gains.
Keywords: coffee price shocks; transitory income shocks; human capital accumulation; opportunity cost of schooling; long-run impacts; schooling; earnings
JEL Classification: J24; O12; O13
Suggested Citation: Suggested Citation