Affiliation:
1. Federal Reserve Bank of Richmond, 701 E Byrd St, Richmond VA 23219 (email: )
2. Kellogg School of Management, Northwestern University, 211 Campus Drive, Evanston, IL 60208, and NBER (email: )
Abstract
Despite increases in the college earnings premium to persistently high levels, investment in college education remains low. We can understand this apparent puzzle by considering the risk of attending college and, in particular, the possibility of failing to graduate. Students with a reasonable probability of completing college already enroll, and for those who do not enroll, the low chance of completion blunts the impact of the rising college premium. In the absence of improved college readiness, our quantitative results suggest that continuing long-standing trends in skill-biased technological change can be expected primarily to increase earnings inequality rather than college attainment. (JEL E24, I22, I23, J24, J31, O33)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
11 articles.
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