Marija Džunić, Nataša Golubović

DOI Number
First page
Last page


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.


education, human capital, identity, identity economics, behavioral economics.

Full Text:



Akerlof, G., & Kranton., R. (2000). Economics and Identity. Quarterly Journal of Economics, 115 (3): 715–53.

Akerlof, G., & Kranton., R. (2002). Identity and Schooling: Some Lessons for the Economics of Education. Journal of Economic Literature, 40 (4): 1167–1201.

Akerlof, G., & Kranton., R. (2005). Identity and the Economics of Organizations. Journal of Economic Perspectives, 19 (1): 9–32.

Akerlof G., & Kranton R., (2008). Identity, supervision, and work groups, “American Economic Review: Papers & Proceedings” 2008, 98(2), pp. 212-217.

Akerlof G., & Kranton R. (2010). Identity Economics. Princeton: Princeton University Press.

Aghion, P., & Howitt, P. (1998). Endogenous Growth Theory. Cambridge, MA: MIT Press.

Arcidiacono, P., Bayer, P., & Hizmo, A. (2010). Beyond signaling and human capital: education and the revelation of ability. American Economic Journal: Applied Economics, 2(4), 76–104.

Ariely, D. (2009). Predictably irrational: the hidden forces that shape our decisions. New York: Harper Collins.

Austen-Smith, D., & Fryer, R. G. (2005). An Economic Analysis of “Acting White”. Quarterly Journal of Economics, 120(2), 551–583.

Avery, C., & Kane, T. (2004). Student perceptions of college opportunities: The Boston COACH program. In C. M. Hoxby (Ed.). College choices: the economics of where to go, when to go, and how to pay for it, (pp. 355–394). Chicago: University of Chicago Press.

Barro, R. (1991). Economic growth in a cross section of countries. The Quarterly Journal of Economics, 106 (2), 407-443.

Barro, R. (1997). Determinants of Economic Growth. A cross-country Empirical Study (NBER Working Paper No. 5698). Cambridge, MA: National Bureau of Economic Research.

Bauman, Z. (2000). Liquid Modernity. Cambridge: Polity Press.

Beck, U. (2000). Risk Society – Towards a New Modernity. Sage Publications Ltd.

Becker, G. (1964). Human Capital. Chicago: Chicago University Press.

Bénabou, R., & Tirole, J. (2002). Self-confidence and personal motivation. Quarterly Journal of Economics, 117(3), 871–915.

Bénabou, R., & Tirole, J. (2011). Identity, Morals, and Taboos: Beliefs as Assets. Quarterly Journal of Economics, 126 (2): 805–55.

Benartzi, S., & Thaler, R. (2000). Myopic loss aversion and the equity premium puzzle. In D. Kahneman & A. Tversky (Eds.), Choices, values, and frames (pp. 301-316). Cambridge, UK, and New York: Cambridge University Press and Russell Sage Foundation.

Benartzi, S., & Thaler, R. (2007). Heuristics and biases in retirement savings behavior. Journal of Economic Perspectives, 21(3), 81–104.

Benhassine, N., Devoto, F., Duflo, E., Dupas, P., & Pouliquen, V. (2015). Turning a shove into a nudge? A “labelled cash transfer” for education. American Economic Journal: Economic Policy, 7(3), 86–125.

Bhuller, M., Mogstad, M., & Salvanes, K. (2017). Life cycle earnings, education premiums and internal rates of return. Journal of Labor Economics, 35(4), 993–1030.

Bridgeland, J., DiIulio, J., & Burke Morison, K. (2006). The silent epidemic: Perspectives of high school dropouts. Technical report, Bill & Melinda Gates Foundation.

Cadena, B., & Keys, B. (2015). Human capital and lifetime costs of impatience. American Economic Journal: Economic Policy, 7(3), 126–156.

Camerer, C., & Loewenstein, G. (2004). Behavioral economics: Past, present, future. In C. Camerer, G. Loewenstein, & M. Rabin (Eds.), Advances in behavioral economics (pp. 3-51). New York and Princeton, NJ: Russell Sage Foundation and Princeton University.

Card, D., & Krueger. B. (1992). Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States. Journal of Political Economy, 100 (1), 1-40.

Carrell, S., Fullerton, R., & West, J. (2009). Does your cohort matter? Measuring peer effects in college achievement. Journal of Labor Economics, 27(3), 439–464.

Chande, R., Luca, M., Sanders, M., Soon, X., Borcan, O., Barak-Corren, N., et al. (2015). Curbing adult student attrition: Evidence from a field experiment. Harvard Business School Working Paper 15-065.

Chen, S., & Schildberg-Hörisch, H. (2018). Looking at the bright side: The motivational effect of overconfidence. (Discussion Paper No 291). Düsseldorf: Düsseldorf University Press.

Chetty, R., Friedman, J., & Rockoff, J. (2014). Measuring the impacts of teachers II: Teacher value-added and student outcomes in adulthood. American Economic Review, 104(9), 2633–2679.

Contreras, D., Elacqua, G., Martinez, M., & Miranda, A. (2016). Bullying, identity and school performance: Evidence from Chile. International Journal of Educational Development, 51, 147-162.

Damgaard, M., & Nielsen, H. (2018) Nudging in education. Economics of Education Review, 64, 313-342.

DellaVigna, S. (2009). Psychology and economics: evidence from the field. Journal of Economic Literature, 47(2), 315–372.

De Paola, M., & Scoppa, V. (2015). Procrastination, academic success and the effectiveness of a remedial program. Journal of Economic Behavior & Organization, 115, 217–236.

Eckstein, Z., Wolpin, K. (1999). Why youths drop out of high school: the impact of preferences, opportunities and abilities. Econometrica 67 (6), 1295–1339.

Evans, B., Baker, R., & Dee, T. (2016). Persistence patterns in massive open online courses (MOOCs). Journal of Higher Education, 87(2), 206–242.

Filippin, A., Paccagnella, M. (2012). Family background, self-confidence and economic outcomes. Economics of Education Review, 31(5), 824–834.

Fisher, I. (1906). The Nature of Capital and Income. New York: Macmillan.

Fryer, R. (2016). Information, non-financial incentives, and student achievement: Evidence from a text messaging experiment. Journal of Public Economics, 144, 109–121.

Giddens, A. (1991). Modernity and Self-Identity: Self in the Late Modern Age. Cambridge: Polity Press.

Golsteyn, B., Grönqvist, H. & Lindahl, L., (2014). Adolescent time preferences predict lifetime outcomes. The Economic Journal, 124, 739-761.

Hastings, J., Van Weelden, R., & Weinstein, J. (2007). Preferences, information, and parental choice behavior in public school choice (NBER Working Paper No. 12995). Cambridge, MA: National Bureau of Economic Research.

Heckman, J., Lochner, L., & Todd, P. (2006). Earnings functions, rates of return, and treatment effects: The Mincer equation and beyond. In E. Hanushek, & F. Welch (Eds.), Handbook of the Economics of Education (pp. 307–458). Elsevier B.V.

Heckman, J., & Kautz, T. (2012). Hard evidence on soft skills. Labor Economics, 19 (4), 451–464.

Hoxby, C. (2000). The Effects of Class Size on Student Achievement: New Evidence from Population Variation, Quarterly Journal of Economics, 115:4, 1239-85.

Hoxby, C., & Turner, S. (2015). What high-achieving low-income students know about college. American Economic Review: Papers & Proceedings, 105(5), 514–517.

Jabbar, H. (2011). The behavioral economics of education: New directions for research. Educational Researcher, 40(9), 446–453.

Jackson, C., Rockoff, J., & Staiger, D. (2014). Teacher effects and teacher-related policies. Annual Review of Economics, 6(1), 801–825.

Johnson, H. (1960). The Political Economy of Opulence. Canadian Journal of Economics and Political Science, 26 (4), 552-564.

Johnson, E., & Goldstein, D. (2003). Do defaults save lives? Science, 302(5649), 1338–1339.

Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-291.

Kahneman, D., Knetsch, J., & Thaler, R. (1991). Anomalies: The endowment effect, loss aversion, and status quo bias. Journal of Economic Perspectives, 5(1), 193–206.

Kiker, B. (1966). The Historical Roots of the Concept of Human Capital. Journal of Political Economy, 74 (5), 481-499.

Koch, A., Nafciger, J., & Nielsen H. (2015) Behavioral economics of education. Journal of Economic Behaviour & Organization, 115, 3-17.

Kranton, R. (2016). Identity Economics 2016: Where Do Social Distinctions and Norms Come From? American Economic Review: Papers & Proceedings, 106 (5), 405–409.

Krueger, A., & Lindahl, M. (2001). Education for growth: Why and for whom? Journal of Economic Literature, 39 (4), 1101-1136.

Laibson, D., (1997). Golden eggs and hyperbolic discounting. The Quarterly Journal of Economics, 112 (2), 443–477.

Lavecchia, A., Liu, H., & Oreopoulos, P. (2016). Behavioral economics of education: Progress and possibilities. In E. Hanushek, S. Machin, & L. Woessmann (Eds.), Handbook of the economics of education (pp. 1–74). Elsevier, B. V.

Levitt, S., List, J., Neckermann, S., & Sadoff, S. (2016). The behaviouralist goes to school: Leveraging behavioral economics to improve economic performance. American Economic Journal: Applied Economics, 4(8), 183–219.

Lochner, L. (2011). Nonproductive benefits of education: crime, health, and good citizenship. In E. Hanushek, & F. Welch (Eds.), Handbook of the Economics of Education (pp. 183–282). Elsevier B.V.

Lucas, R. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22 (1), 3-42.

Mankiw, N., Romer, D., & Weil, D. (1992). A contribution to the empirics of economic growth. The Quarterly Journal of Economics, 107 (2), 407-437.

Mincer, J. (1958). Investment in human capital and personal income distribution. Journal of Political Economy, 66(4), 281–302.

Oreopoulos, P. (2007). Do dropouts drop out too soon? Wealth, health and happiness from compulsory schooling. Journal of Public Economics, 97(11-12), 2213–2229.

Oreopoulos, P., & Dunn, R. (2013). Information and college access: Evidence from a randomized field experiment. Scandinavian Journal of Economics, 115(1), 3–26.

Oreopoulos, P., & Ford, R. (2016). Keeping college options open: A field experiment to help all high school seniors through the college application process. (NBER Working Paper No. 22320). Cambridge, MA: National Bureau of Economic Research.

Page, L., Garboua, L., & Montmarquette, C. (2007). Aspiration levels and educational choices: An experimental study. Economics of Education Review, 26(6), 747–757.

Reyes, M., Brackett, M., Rivers, S., White, M., & Salovey, P. (2012). Classroom emotional climate, student engagement, and academic achievement. Journal of Educational Psychology, 104(3), 700-712.

Rogers, T., & Feller, A. (2016). Discouraged by peer excellence: Exposure to exemplary peer performance causes quitting. Psychological Science, 27(3), 365–374.

Schultz, T. (1960). Capital Formation by Education. Journal of Political Economy, 68 (6), 571-583.

Schultz, T. (1961). Investment in Human Capital. The American Economic Review, 51 (1), 1-17.

Solow, R. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70 (1), 65–94.

Steel, P. (2007). The nature of procrastination: a meta-analytic and theoretical review of quintessential self-regulatory failure. Psychological Bulletin, 133 (1), 65-94.

Tan, E. (2014). Human Capital Theory: A Holistic Criticism. Review of Educational Research, 84 (3), 411-445.

Thaler, R., & Benartzi, S. (2004). Save more tomorrow: Using behavioral economics to increase employee saving. Journal of Political Economy, 112(1), 164–187.

Thaler, R., & Sunstein, C. (2008). Nudge: Improving Decisions about Health, Wealth and Happiness. Yale University Press.

von Thunen, H. (1875). Der Isolierte Staat. Chicago: Comparative Education Center, University of Chicago.

Todd, P., Wolpin, K. (2003). On the specification and estimation of the production function for cognitive achievement. Economic Journal, 113, 3–33.

Walton, G., & Cohen, G. (2011). A brief social-belonging intervention improves academic and health outcomes of minority students. Science, 1447–4151.

Yeager, D., Romero, C., Paunesku, D., Hulleman, C., Schneider, B., Hinojosa, C., et al. (2016). Using design thinking to improve psychological interventions: The case of the growth mindset during the transition to high school. Journal of Educational Psychology, 108(3), 374–391.


  • There are currently no refbacks.

Print ISSN: 0353-7919
Online ISSN: 1820-7804