It is puzzling that socioeconomic background greatly affects educational choice. Distinguished from the explanations based on expected utility theory, this paper attempts to explore the psychological mechanisms of generating educational identity1 and schooling choice. It offers a self-signaling model where (1) it incorporates self-esteem concerns into the agent’s payoff function, (2) the investment in schooling not only signals her cognitive ability but also brings the agent into cognitive dissonance and reduction when the perceptions of ability are time-dependent. Using this model, I show a more discriminating analysis of educational choice which combines multi-dimensional factors including socioeconomic background, cognitive and non-cognitive abilities. I identify the conditions under which the high ability agent fails to invest in education. The quality of school and the preschooling are key variables. The model suggests that public policy can help poor children by improving both the early and later education quality at school.identity, educational choice, poverty
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