Using data from the Innovation Panel from Understanding Society we investigate how subjective expectations about labour market outcomes, and the randomly allocated provision of information about actual earnings , influence (i) the formation of expectations related to higher education, and (ii) human capital accumulation in the form of higher expected education attainment. We find that expectations about human capital accumulation are consistent with a rational choice framework; (i) parents who have higher expected returns to a degree report a higher probability of applying to university and, (ii) when the financial cost of attainment is forgone agents report a higher probability of applying. We find that within the household there is a strong association between parents and children’s expectations, and this relationship differsby the respondent’s sex; male children are more strongly associated to their father’s expectations. We find that parent’s expectations about their own child’s labour market outcomes are more optimistic than their population expectations. We also find that errors parents make about the distribution of population earnings are strongly associated with the errors they make about their own child. We find that the information treatment increases the expected earnings for parents who underestimated their expected earnings for their own child at baseline and decreases the error in population expected earnings – where the magnitude of the fall in error depends on the amount of error at baseline. Through an increase in the expected payoff mechanism the treatment increases the probably to apply to university – although the treatment effect is heterogeneous conditioning on the respondents baseline expectations.
Presented by:
Joshua Fullard, ISER
Date & time:
October 25, 2017 12:00 pm - October 25, 2017 1:00 pm
Venue:
2N2.5B.24 - ISER Boardroom. Note change of venue!
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