Does education have an impact on patience and risk willingness?

ABSTRACT

We analyse the causal effect of education on patience (also known as time preference) and risk willingness using the German compulsory schooling reform, which took effect in West Germany after World War II. This reform increased compulsory schooling from 8 years to 9 years. We use two-stage least squares to obtain causal effects. In line with the literature, the results show a positive effect of education on risk willingness mainly for those who were the immediate partakers of the reform. Contrary to the literature, a negative effect of education on patience is found. This effect is larger as more years around the pivotal years are considered.

KEYWORDS:

• Time preference
• risk willingness
• educational reform
• instrumental variables

JEL CLASSIFICATION:

• I28
• I21
• D81
• C39
• D90

Acknowledgement

I thank the two anonymous referees for their constructive feedback, which helped improve the article. I am also grateful for Hendrik Schmitz, Britta Hoyer, Diana Freise, Valentin Schiele, Matthias Westphal, Daniel Kamhöfer, Emmanuel Baddoo and the participants of the Faculty Research workshop by the Department of Economics, Paderborn University in Melle for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ see Pischke and Von Wachter (2008) for details.

² see Pischke (2007) for details.

³ See Cygan-Rehm (2018) for in-depth discussion.

⁴ see Kuhlmann and Röber (2006) for details on wage-setting in Germany.