Abstract
Investigating interaction of the lumpy nature of educational investments and informational frictions on returns to and costs of education, I show that pessimistic beliefs can be self-confirmed in equilibrium. Among some of its consequences, I argue that the commonly pursued research methods may not always identify the true underlying skill distributions.
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Acknowledgements
I am grateful to two anonymous referees for their valuable feedback. My further thanks for insightful discussions are due to Arpad Abraham, Alkiviadis Georgiadis Harris, Wouter den Haan, Caroline Hoxby, Philipp Kircher, Ramon Marimon, Kazushige Matsuda, Josue Ortega, Franz Ostrizek, Luis Rojas, Florian Scheuer and Mirko Wiederholt. An intermediate version of this note was prepared while I was visiting the economics department of the London School of Economics. Its hospitality and assistance are gratefully acknowledged. All remaining errors are my own.
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Mazur, K. A note on pessimism in education and its economic consequences. J Econ Inequal 19, 773–783 (2021). https://doi.org/10.1007/s10888-021-09486-7
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DOI: https://doi.org/10.1007/s10888-021-09486-7