Great Expectations: The Unintended Consequences of Educational Choices

Human capital is invariably found to be an important explanatory variable of various proxies for well being (WB), i.e. income, happiness, job and life satisfaction, and health status. Nevertheless, to date few systematic efforts have been made to explain its various interconnected functions. The U-shaped age-SWB relation found in many empirical studies suggests that investigating the pattern of different measures of WB over people’s life cycles may reveal important information and provide useful insights into the principal mechanisms that connect human capital and WB. In this paper, I explore data drawn from the Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy, which is a rich source of information on people’s socioeconomic and educational backgrounds, educational and skill mismatches in the workplace, and various measures of WB such as income, happiness, job satisfaction, and health status. I adopt a novel approach based on the idea that one should look at the overall contribution of education to well being within people’s life-cycles. The tentative explanations of my empirical findings are: (a) more educated people and people with vocational educations experience wide mismatches in their aspirations and expectations early in their adult lives; (b) these mismatches are largely confined to the labour market; and (c) the curvature of the U-shaped agehappiness relationship depends on the level and type of education. The suggested interpretation of these results is that education affects both people’s expectations and the way they react to unfulfilled aspirations.