| Abstract |
This paper investigates the policy opportunities implied by the potential inaccuracy of youths' expectations regarding the returns to education. Using data from the Cape Area Panel Study in South Africa on actual and expected returns, we investigate a sequential decision making model of educational investment to identify inaccuracy in expectations of the return to grade 12. We also find that about 27% of the return to grade 12 in this context is attributable to the value of accessing higher education options, though this varies by race and gender. We consider different types of information provision to youth about the returns to education. We find that information provision about the average returns that does not include option values may lead to some youth making sub-optimal investment decisions. We conclude that information provision should be targeted (specific to individual characteristics) and that it should be provided in a sequential decision making framework. |