Marco Castillo, Georgia Institute of Technology
Paul Ferraro, Georgia State University
Jeff Jordan, University of Georgia
Ragan Petrie, George Mason University
Purpose
Objective: To understand how school children view the future.
Goal: To use this understanding to reduce the high school drop out rate.
Result: Inform policies and programs on improving educational outcomes.
Time Preference Instrument
- Decide between $49 in one month or $49+$X in seven months.
- Measure of time preferences or discount rate.
- Implied interest rate you would need to be willing to wait for higher amount of money.
- Also called impatience.
- 866 8th-graders (13-15 yrs) in Griffin, GA.
- 3 cohorts, entire school district.
- 20 separate decisions ($50.83 to $98.02).
- Paid with Wal-Mart gift cards.
- Payment private, by school principal.
- Switch point implies discount rate range.
Basic Result 1
| Discount Rates | ||||
| Male | 90.2 | |||
| Female
Blacks Whites White males White females Black males Black females |
81.1
91.0 81.4 83.9 78.7 97.4 85.4 |
Males have higher discount rates than females.
Blacks have higher discount rates than whites. White males and white females are not significantly different. Black males are more impatient than black females. Black boys are most impatient. |
||
Due to risk preferences?
- May appear to have larger discount rates, when it is really risk aversion.
- This would imply that black boys are more risk averse than any other group.
- Collected data on risk preferences in same population to check.
- Experiment used decisions over 5 lotteries ($25 for sure, increasing in value and risk) – subjects choose one (A, B, C, D or E) – E most risky.
| A | B | C | D | E | |||||||||
| 1 | $25 | 1 | $40 | 1 | $55 | 1 | $70 | 1 | $85 | ||||
| 2 | 2 | 2 | 2 | 2 | |||||||||
| 3 | 3 | 3 | 3 | 3 | |||||||||
| 4 | 4 | 4 | 4 | 4 | |||||||||
| 5 | 5 | 5 | 5 | 5 | |||||||||
| 6 | 6 | 6 | 6 | 6 | |||||||||
| 7 | 7 | 7 | 7 | 7 | |||||||||
| 8 | 8 | 8 | 8 | 8 | |||||||||
| 9 | 9 | 9 | 9 | 9 | |||||||||
| 10 | 10 | 10 | 10 | 10 | |||||||||
| 11 | $25 | 11 | $20 | 11 | $15 | 11 | $10 | 11 | $5 | ||||
| 12 | 12 | 12 | 12 | 12 | |||||||||
| 13 | 13 | 13 | 13 | 13 | |||||||||
| 14 | 14 | 14 | 14 | 14 | |||||||||
| 15 | 15 | 15 | 15 | 15 | |||||||||
| 16 | 16 | 16 | 16 | 16 | |||||||||
| 17 | 17 | 17 | 17 | 17 | |||||||||
| 18 | 18 | 18 | 18 | 18 | |||||||||
| 19 | 19 | 19 | 19 | 19 | |||||||||
| 20 | 20 | 20 | 20 | 20 | |||||||||
Basic Result 2
| Black | White | ||||||||
| Decision | Female | Male | Female | Male | |||||
| 1 | 36 | 25% | 28 | 19% | 34 | 26% | 24 | 16% | |
| 2 | 24 | 17% | 21 | 14% | 42 | 32% | 36 | 25% | |
| 3 | 21 | 15% | 30 | 20% | 25 | 19% | 27 | 18% | |
| 4 | 21 | 15% | 16 | 11% | 12 | 9% | 26 | 18% | |
| 5 | 39 | 28% | 54 | 36% | 17 | 13% | 33 | 23% | |
| Average | 3.0 | 3.3 | 2.5 | 3.0 | |||||
| Obs | 141 | 149 | 130 | 146 | |||||
Basic Result 3
Black boys have larger discount rates, even when controlling for other variables (including math & reading skills, free & reduced lunch).
This summer we will conduct a phone survey of all families of 8th graders to find out more about what home factors may affect discount rates.
Basic Result 4
- Discount rates are positively correlated with outcomes (disciplinary referrals) even controlling for other variables that may affect discipline.
- Disciplinary referrals relate to dropping out of school and lower income later in life.
- In Spalding school district, among drop-outs, 4.6 referrals.
- Among our subjects, 1.8 referrals.
Inconsistencies in Risk
(some preliminary evidence)
- Interested in whether kids exhibit rational preferences over risk.
- Are they expected utility maximizers?
- Or, something else?
Risk Preferences Instrument
- Measures risk preferences and choice consistency.
- 6 separate decisions over lotteries.
- One decision over 5 lotteries.
- Five decisions over $0, $30, $40 (Chew & Waller, 1986, design).
- Paid with Wal-Mart cards.
- Payment private, by school principal.
- 603 8th-graders (13-15 yrs) in Griffin, GA.
Lottery 1
| A | B | |||
| 1 | $30 | 1 | $30 | |
| 2 | 2 | |||
| 3 | 3 | |||
| 4 | 4 | |||
| 5 | 5 | |||
| 6 | 6 | |||
| 7 | 7 | |||
| 8 | 8 | |||
| 9 | 9 | |||
| 10 | 10 | |||
| 11 | 11 | |||
| 12 | 12 | |||
| 13 | 13 | |||
| 14 | 14 | |||
| 15 | 15 | |||
| 16 | 16 | $0 | ||
| 17 | 17 | $40 | ||
| 18 | 18 | |||
| 19 | 19 | |||
| 20 | 20 | |||
Lottery 2
| A | B | |||
| 1 | $0 | 1 | $0 | |
| 2 | 2 | |||
| 3 | 3 | |||
| 4 | 4 | |||
| 5 | 5 | |||
| 6 | 6 | |||
| 7 | 7 | |||
| 8 | 8 | |||
| 9 | 9 | |||
| 10 | 10 | |||
| 11 | 11 | |||
| 12 | 12 | |||
| 13 | 13 | |||
| 14 | 14 | |||
| 15 | 15 | |||
| 16 | $30 | 16 | ||
| 17 | 17 | $40 | ||
| 18 | 18 | |||
| 19 | 19 | |||
| 20 | 20 | |||
Lottery 3
| A | B | |||
| 1 | $30 | 1 | $0 | |
| 2 | 2 | |||
| 3 | 3 | |||
| 4 | 4 | |||
| 5 | 5 | $40 | ||
| 6 | 6 | |||
| 7 | 7 | |||
| 8 | 8 | |||
| 9 | 9 | |||
| 10 | 10 | |||
| 11 | 11 | |||
| 12 | 12 | |||
| 13 | 13 | |||
| 14 | 14 | |||
| 15 | 15 | |||
| 16 | 16 | |||
| 17 | 17 | |||
| 18 | 18 | |||
| 19 | 19 | |||
| 20 | 20 | |||
Lottery 4
| A | B | |||
| 1 | $30 | 1 | $0 | |
| 2 | 2 | |||
| 3 | 3 | |||
| 4 | 4 | |||
| 5 | 5 | $40 | ||
| 6 | 6 | |||
| 7 | 7 | |||
| 8 | 8 | |||
| 9 | 9 | |||
| 10 | 10 | |||
| 11 | 11 | |||
| 12 | 12 | |||
| 13 | 13 | |||
| 14 | 14 | |||
| 15 | 15 | |||
| 16 | $0 | 16 | ||
| 17 | $40 | 17 | ||
| 18 | 18 | |||
| 19 | 19 | |||
| 20 | 20 | |||
Lottery 5
| A | B | |||
| 1 | $30 | 1 | $0 | |
| 2 | 2 | $40 | ||
| 3 | 3 | |||
| 4 | 4 | |||
| 5 | 5 | |||
| 6 | $40 | 6 | ||
| 7 | 7 | |||
| 8 | 8 | |||
| 9 | 9 | |||
| 10 | 10 | |||
| 11 | 11 | |||
| 12 | 12 | |||
| 13 | 13 | |||
| 14 | 14 | |||
| 15 | 15 | |||
| 16 | 16 | |||
| 17 | 17 | |||
| 18 | 18 | |||
| 19 | 19 | |||
| 20 | 20 | |||
Basic Result 5
- Black and white students are different in how they make decisions.
- Black boys and girls exhibit “pessimistic weighting.”
- Weight bad outcomes higher and good outcomes lower.
Discipline
Discipline referrals incurred by a child have been found to be a good predictor of the child’s decision to drop out of school and of lower average lifetime earnings.
Hypotheses
- The odds of a student being referred for disciplinary action increases if the student is male, black, in special education classes, or is poor.
- The gender and race of the teachers who refer students for disciplinary action have a significant impact on the first hypothesis.
Basic Result 6
- As hypothesized: the odds of a student being referred for disciplinary action increases if the student is male, black, chronically absent, or is poor.
- Gender of teacher was not significant but race was although not in the way hypothesized.
- Black female teachers were more likely to discipline students.
- Special teacher/student dynamic between black males.
- Further research will link this to student impatience and other educational outcomes such as dropping out.
Implications
- We see differences in how children view the future as well as how they view likely outcomes.
- We see connections between impatient decision making and discipline.
- Does impatience cause discipline problems for black boys or does the disproportionate application of discipline over the course of a school career, even if administered by a black or male teacher, affect how African American children see the future?
- One implication of this research is the need for more immediate rewards than those long-term rewards suggested by high school graduation.
- Differences in discount rates may mean changing the level of those rates is less important than making rewards more immediate and sequential.
- If preferences are stable from a young age, uniform incentive and rewards programs may have the perverse effect of making the gaps between children larger.
- Children who would already excel and graduate will take further advantage of incentives and reinforce gaps and pessimistic outcomes.
- This implies the need for targeted incentives.
- All of this argues for finding out when children form their preferences and risk perceptions and what is behind that formation.
- This will then require the changing of these discount rates rather than just designing new incentive programs that increase gaps.