LIFE-CYCLE SCHOOLING AND DYNAMIC SELECTION BIAS - MODELS AND EVIDENCEFOR 5 COHORTS OF AMERICAN MALES

This paper examines an empirical regularity found in many societies: t hat family influences on the probability of transiting from one grade level to the next diminish at higher levels of education. We examine t he statistical model used to establish the empirical regularity and th e intuitive behavioral interpretation often used to rationalize it. We show that the implicit economic model assumes myopia. The intuitive i nterpretive model is identified only by imposing arbitrary distributio nal assumptions onto the data. We produce an alternative choice-theore tic model with fewer parameters that rationalizes the same data and is not based on arbitrary distributional assumptions.