The role of education interventions in improving economic rationality

Abstract

Schooling rewards people with labor market returns and nonpecuniary benefits in other realms of life. However, there is no experimental evidence showing that education interventions improve individual economic rationality. We examine this hypothesis by studying a randomized 1-year financial support program for education in Malawi that reduced absence and dropout rates and increased scores on a qualification exam of female secondary school students. We measure economic rationality 4 years after the intervention by using lab-in-the-field experiments to create scores of consistency with utility maximization that are derived from revealed preference theory. We find that students assigned to the intervention had higher scores of rationality. The results remain robust after controlling for changes in cognitive and noncognitive skills. Our results suggest that education enhances the quality of economic decision-making.

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