Human Capital and the Lifetime Costs of Impatience∗

In this paper, we examine the role of impatience in the formation of human capital – arguably the most important investment decision individuals make during their lifetimes. We pay particular attention to a set of investment behaviors that cannot be explained solely by variation in exponential discount rates. Using data from the NLSY and a straightforward measure of impatience, we find that impatient people more frequently invest in dynamically inconsistent ways such as starting an educational program but failing to complete it or dropping out of college with one year or less remaining. The cumulative investment differences result in the impatient earning 13 percent less and expressing significantly more regret as this cohort reaches middle age. JEL: D03, D91, I21, J24