Subjective expectations and schooling choices in Latin America and the Caribbean

Abstract

Expectations about future labour market opportunities are essential for education and labour market decisions. This paper uses data from a survey of youths in seven Latin American and Caribbean countries to explore the role of expected returns to education on schooling decisions. We find substantial variation in subjective expectations partly explained by youths' socioeconomic characteristics. Also, we find that enrolment in tertiary education is positively related to perceived education returns. Furthermore, the association of expectations with schooling choices differs across individuals in relevant domains, including gender, skills, and socioeconomic background. Our results suggest that public policies might impact choices and reduce socioeconomic gaps in schooling by providing information on education returns.