The Rational Adolescent: Privilege, Policy, and Myopic Human Capital Acquisition

Standard human capital models assume adolescents maximize discounted lifetime earnings when allocating effort to education. If adolescents are impatient, as evidence indicates, then attempts to explain present choices in terms of distant consumption may lack predictive power. This paper posits a model in which rational but myopic adolescents trade off privileges against leisure, while schools set an implicit “price” of leisure by revoking privileges for low effort choices. The response of effort choices and skill outcomes to changes in the price of leisure (as measured by an index of school-specific discipline policies) is estimated. Court climate and density of public interest lawyers instrument for the price of leisure, according to the following logic: Studentfriendly appellate courts and public interest lawyers in a state increase administrators’ fear of lawsuits, leading them to impose leisure prices. Results show that students appear to consume less leisure, as measured by truancy, when costs of leisure are higher; high school graduation and labor participation outcomes appear higher for students from schools with higher prices of leisure; and state or regional variations in the wage premium for educated workers do not explain observed truancy, education, or employment outcomes.