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

See all articles by Bladimir Carrillo

Bladimir Carrillo

Universidade Federal de Pernambuco

Multiple version iconThere are 2 versions of this paper

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

Carrillo Bermúdez, Bladimir, Present Bias and Underinvestment in Education? Long-Run Effects of Childhood Exposure to Booms in Colombia (July 23, 2019). Journal of Labor Economics, Forthcoming , Available at SSRN: https://ssrn.com/abstract=3353403 or http://dx.doi.org/10.2139/ssrn.3353403

Bladimir Carrillo Bermúdez (Contact Author)

Universidade Federal de Pernambuco ( email )

Recife
Brazil

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