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Human Capital and the Lifetime Costs of Impatience †

Human Capital and the Lifetime Costs of Impatience † 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 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Economic Policy American Economic Association

Human Capital and the Lifetime Costs of Impatience †

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Publisher
American Economic Association
Copyright
Copyright © 2015 by the American Economic Association
Subject
Articles
ISSN
1945-7731
eISSN
1945-774X
DOI
10.1257/pol.20130081
Publisher site
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Abstract

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 )

Journal

American Economic Journal: Economic Policy – American Economic Association

Published: Aug 1, 2015

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