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Learning Your Own Ability

Author

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  • Carlos Madeira
Abstract
Families’ human capital investments depend on beliefs about their children’s performance. I build a dynamic model of expectation formation to show how agents use both observable and unobservable information to predict their school scores. The model shows parents and students have substantial knowledge of unobservable factors affecting their performance, especially in middle and high school. Families are overconfident towards expecting higher grades and expectation formation differs by race. Families’ ability to predict future scores improved substantially during middle school due to several factors: lower bias and variance of the prediction errors, and a better use of past scores as predictors.

Suggested Citation

  • Carlos Madeira, 2021. "Learning Your Own Ability," Working Papers Central Bank of Chile 919, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:919
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_919.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Madeira, Carlos, 2020. "Learning your own ability," Journal of Economic Dynamics and Control, Elsevier, vol. 121(C).
    2. Pamela Giustinelli, 2022. "Expectations in Education: Framework, Elicitation, and Evidence," Working Papers 2022-026, Human Capital and Economic Opportunity Working Group.

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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J00 - Labor and Demographic Economics - - General - - - General

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