Endogenous Mortality Risk and Educational Attainment

University Of Texas Austin, Austin TX

Investigators

Abstract

DESCRIPTION (provided by applicant): The main objective of the proposed study is to investigate how much of the difference in educational attainments between black and white men can be explained by the differences in their mortality risks. I develop a dynamic optimal stopping-point life cycle model in which both educational attainment and individual mortality risk are endogenously determined. In this model, an agent's mortality function depends on his own medical expenditure and the mortality risk of his reference group. The calibration method is applied to a representative agent model to understand average educational differences between black men and white men. I let the black male population be the reference group for a representative black male, and the white male population is the reference group for a representative white male. In such a representative agent framework, the endogeneity problem is solved by an equilibrium condition: the optimal level of medical expenditure of the representative agent is equal to the reference group's medical expenditure. Both the agent's years of schooling and life expectancy are endogenous while the reference group's life expectancy is exogenous. The resulting years of schooling for black and white men are then compared with observed schoolings for black and white men, respectively. The econometrics method is applied to heterogeneous individuals. I use regional and race-specific variations in mortality risks to estimate the model at both the regional and the individual levels. The estimated parameters are used to simulate various policy suggestions to reduce black-white differences in education.