Education Choices and Returns to Schooling: Mothers' and Youths' Subjective Expectations and their Role by Gender

In this paper we investigate the role of expected returns to schooling and of perceived risks (of unemployment and earnings) as determinants of schooling decisions. Moreover, our data also allow us to analyze whether youths' and/or mothers' expectations predict schooling decisions, and whether this depends on the age and gender of the youth. In particular, we use Mexican data that contain labor market expectations of mothers and youths. We find that expected returns and risk perceptions are important determinants of schooling decisions, the latter in particular from the perspective of the mother. Boys' expectations predict the decision to enter college, but not to enter high school. While girls' own expectations do not predict either of the two educational decisions, mothers' expectations are particularly strong predictors of their daughters' decisions.