In Short:

Students facing poverty and instability anticipate a low probability of completing longer educational programs and thus rationally choose shorter, more achievable alternatives.

Abstract

Policy conclusions from structural models hinge on model specification. Yet, multiple models could rationalize the same empirical patterns. To aid in model specification, we introduce a new, interdisciplinary mixed-methods approach that relies on qualitative data from systematically analyzed open-ended interviews. The idea is straightforward: asking decision-makers how they make decisions can help the researcher to design better structural models of decision-making or rule out classes of models that are less useful. We suggest three steps: (i) collecting qualitative data and analyzing it using rigorous qualitative methods to generate insights for modeling decision-making; (ii) corroborating these insights using large-N quantitative datasets like the National Longitudinal Survey of Youth 1997 (NLSY97); and (iii) using these insights to guide specification of a tractable structural econometric model. We apply our approach to post-secondary education choices, where investment levels are puzzlingly low among resource-constrained students. Findings suggest that students facing poverty and instability anticipate a low probability of completing longer educational programs and thus rationally choose shorter, more achievable alternatives. Estimated utility parameters, policy conclusions, and welfare calculations hinge on what we assume individuals believe about the likelihood of completing school. Our results underscore the value of using qualitative data and analytical methods to gather insights from decision-makers to build better models of decision-making.

About the author

Stefanie DeLuca

professor, school of government and policy

Stefanie DeLuca studies how experiences in social settings like neighborhoods and schools shape the outcomes of disadvantaged families and young people, and how policy interventions can increase their opportunities.