ECONOMICS OF EDUCATION REVISITED - NEW INSIGHTS FROM IDENTITY AND BEHAVIORAL ECONOMICS.

This paper reviews the economic literature on education along with the attempts to integrate sociological and psychological views of education into standard economic models. The analysis points to the key concepts from sociology and behavioral economics that are translated into inputs to economic models of education, in order to improve the understanding of the economists’ fundamental concern – resource allocation. By extending economic models that capture the relation between investing efforts and expected returns to education, insights from identity economics and behavioral economics shed light to the following question: when and under what circumstances are investments in education effective? Identity economics implies that educational efforts are not perfect determinants of the economic returns to education, taking into account that investments in education are determined by students’ social norms, ideals and identities. Behavioral economics focuses on behavioral biases that affect the individuals’ decisions on investing efforts in education and consequently, their long-term welfare. This novel framework contributes to education research by specifying policy interventions that could mitigate identified behavioral barriers that constrain decision making concerning educational pathways. [ABSTRACT FROM AUTHOR]