Present Bias and Underinvestment in Education? Long-run Effects of Childhood Exposure to Booms in Colombia
Bladimir Carrillo (Universidade Federal de Viçosa)
J24, O12, O13
Coffee Price Shocks, Transitory Income Shocks, Human Capital Accumulation, Opportunity Cost of Schooling, Long-run Impacts, Schooling
Economic Theory and Applications
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.
Suggested citation: Carrillo, B. (2019), ‘Present Bias and Underinvestment in Education? Long-run Effects of Childhood Exposure to Booms in Colombia’, Nota di Lavoro 7.2019, Milano, Italy: Fondazione Eni Enrico Mattei