Differences in discount rates across individuals

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Consider the model presented in Section 10.2 and suppose that the effective discount rate r varies across individuals (e.g., because of credit market imperfections). Show that individuals facing a higher r would choose lower levels of schooling. What happens if you estimate the wage regression similar to (10.12) in a world in which the source of disparity in schooling is differences in discount rates across individuals?

Reference no: EM131139190

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