Imagination, Time Preference and Human Capital Investments

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 06.03.2007, 12:15 - 13:30


Presentation by 

Lex Borghans (Maastricht University)


Economic theory regards education as an important investment, but many students study few hours, stay in school longer than required, and continue their education in other fields after graduation. We pursue that a lack of imagination about the future reduces the willingness to invest. Students with less imagination will discount the period after graduation more and will therefore procrastinate entrance to the labor market. When they enter the labor market, they will have a higher probability to regret this delay. To test the empirical relevance of the model, we measure imagination and time preference in three custom-designed Dutch surveys. We find a robust negative correlation between these concepts and confirm the predictions that students with less imagination stay longer in college, and report more regret of having stayed longer. If high time preference is not only related to a preference for current consumption but also to a blurred vision of the future, policy to reduce present oriented behavior might be efficient.

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