Economics of Education Review | 2019
Young, Gifted and Lazy? The Role of Ability and Labor Market Prospects in Student Effort Decisions
Abstract
This paper examines the decision-making process of students from an economic perspective in order to understand what determines an in- dividual’s willingness to provide effort. Our theoretical model predicts that ability and job market prospects are positive determinants. Ana- lyzing a novel dataset on thousands of German students, however, we instead find that ability has a significantly negative effect on effort. It seems that the marginal gain of increasing effort in terms of higher ex- pected income after studying is lower for high-ability students compared to low-ability students. In regard to the second determinant, the evi- dence rejects a similar argument, according to which great job market prospects may impair student effort. Applying an instrumental vari- able approach based on official unemployment data on regional labor markets, we can confirm our prediction on the positive role of perceived employment prospects in actual student behavior.