Introduction Overview of Literature Data Econometric Model Very Preliminary Results Separating the Effects of Risk Attitudes, Cognitive and Non-Cognitive Skills, Trust and Financial Aid in Schooling Decisions Mathias A NDRÉ (École Polytechnique, CREST), Christian B ELZIL (École Polytechnique, ENSAE, IZA), François P OINAS (Toulouse School of Economics), Konstantinos T ATSIRAMOS (IZA) Internal Seminar, CREST-LMI January 12, 2011 Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Outline 1 Introduction 2 Overview of Literature 3 Data German Socio Economic Panel and Background Variables Psychometric questionnaire 4 Econometric Model Factors Model à la Cunha & Heckman Likelihood and Identification 5 Very Preliminary Results Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Context and Framework Motivation Usual determinants of higher education : cognitive skills, parental backgrounds and other covariates, liquidity constraints. Deeper in the individual usually unobserved heterogeneity (caracteristics or preferences) : Non cognitive skills and personality traits (or social preferences), Risk aversion, risk perception Social preferences, early childhood investments, etc. Difficulty to have direct measures in practice (LC unmeasured by definition) and no unified framework. Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Context and Framework Remarks on Risk Influence Risky accumulation process of human capital : uncertainties on return to schooling Risks of success/failure (imperfect information set) Uncertainty of finding a job after graduating, about the real quality of diploma (wage distribution unknown) Education can also be an insurance against risks on the labor market and have an effect on risk exposure (income fluctuations, unemployement, etc.). Imperfections on loan markets (no consensus about returns to schooling) can cause liquidity constraints and uncover the risks. Can risk aversion influence schooling choices ? Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Context and Framework Framework (1/2) We use German Socio Economic Panel (GSOEP) between 2000 and 2008 with personality questionnaire, risk attitudes and background variables. We have scolarity choices and labor income. Our approach is tied to both Psychometrics (self-reported measurements) and to Economics (real life economic outcomes, not only tests). German schooling system is particular with two main tracks : academic (Gymnasium) and professional. It is called early tracking because children are selected at age 11. Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Context and Framework Framework (2/2) With a simple behavioral model, we study different choices : Occupational choices for professionnal track (P) Drop out (G1) and continuation probability to university (G2) for academic. Application of Factors Models as Carneiro, Hansen, Heckman (IER 2003) by maximum likelihood with measurement errors and a simulated random part for factors. We will use Heckman & Singer’s framework for true unobserved heterogeneity for the financial aid variable. Two parts in the likelihood : Extraction of the distribution of Factors and Estimation of the discrete choice model. Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Context and Framework Outline 1 Introduction 2 Overview of Literature 3 Data German Socio Economic Panel and Background Variables Psychometric questionnaire 4 Econometric Model Factors Model à la Cunha & Heckman Likelihood and Identification 5 Very Preliminary Results Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Outline 1 Introduction 2 Overview of Literature 3 Data German Socio Economic Panel and Background Variables Psychometric questionnaire 4 Econometric Model Factors Model à la Cunha & Heckman Likelihood and Identification 5 Very Preliminary Results Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Related works Factors Models and Noncognitive Skills Cunha, Heckman (AER 2007, JHR 2008), Heckman, Stixrud, Urzua (JLE 2006) Cunha, Heckman, Schennach (Ecta 2010) : Non linear dynamic factors (CS and NCS with endogenous parental investments) non parametrically identified (linearly estimated on CNLSY) with additive measurement errors terms Importance of measurement errors, of timing of investments, of self-productivity effects (only cross for NCS on CS) IZA Workshop (01/2011): Cognitive and Non-Cognitive Skills Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Related works Risk Aversion and Schooling Decisions Lehvari, Weiss (AER 1974), Belzil, Hansen (2004), Brodaty, Gary-Bobo, Prieto (2010) Special Issue of Labour Economics (2007), Sociological litterature (Holm, Jäger (2006)) Belzil, Leonardi (2007) : Given high school completion, continuing to higher education negatively correlated with risk aversion. Individual differences in risk aversion almost as important as parents’ educational background and with good explanatory power (e.g. resp. 30% against 55% of variance) But no direct measure of heterogeneity. Dohmen et al. (2005) : good quality of the GSOEP. Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Related works Behavorial models and social preferences Bohnet, Zeckhauser (2004), Fehr (2009) : Role of trust in social and market transactions (beliefs) Behavioral and statistical evidence that trust is not just a special case of risk taking (using GSOEP) If risky context, trust can be a critical ingredient Imperfect measure and need of link it with risk behavior Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Related works The Liquidity constraints question Leslie (1984), Keane (AER 2002) Keane, Wolpin (IER 2001) : Methodological contribution (simulated likelihood with classification errors, form of EMAX, terminal period). Structural estimation (dynamic school/work model with savings decisions). LC exist but no impact on enrollment, substantial parental transfers increase attendance. Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results Outline 1 Introduction 2 Overview of Literature 3 Data German Socio Economic Panel and Background Variables Psychometric questionnaire 4 Econometric Model Factors Model à la Cunha & Heckman Likelihood and Identification 5 Very Preliminary Results Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results German Socio Economic Panel and Background Variables German schooling system and Choices diagram Earling tracking (age 11) : Professionnal (Apprenticeship, Vocational) versus Academic (Gymnasium). If Abitur is completed , one can enter higher education (University). AP G1 G1 V G1 Academic Track W AP G1 I G2 V Abitur W Initial Condition I AP P U V P Professional Track P W P I Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
Introduction Overview of Literature Data Econometric Model Very Preliminary Results German Socio Economic Panel and Background Variables Covariates The 10 Covariates are : Indicators of being in the Gymnasium track (at age 17), gender, indicator if individual is born in former East Germany Indicators if father and mother has attended Gymnasium (cross product), Household size, Number of siblings between 0-14 when individual is aged 17 Yearly per capita income and Government-provided financial aid for higher education (in thousands of 2005 euros) This Financial Aid Indicator is very useful (see below). Internal Seminar CREST-LMI Separating Effects in Schooling Decisions
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