Risk Premium and Expectations in Higher Education
AbstractThis paper takes the risk of college participation into context when evaluating the return to college education. College dropout and a higher permanent income shock for those who graduate from college accounts for 51% of the excess return to college education. Using a simple risk premium approach, I reconcile the observed high average returns to schooling with relatively low attendance rates. A high dropout risk has two important effects on the estimated average returns to college education: via selection bias and via risk premium.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 629.
Date of creation: May 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
- NEP-EDU-2011-06-18 (Education)
- NEP-LAB-2011-06-18 (Labour Economics)
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