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The supply of college-educated workers: the roles of college premia, college costs, and risk

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  • Kartik B. Athreya
  • Janice Eberly
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    Abstract

    Despite a large measured college premium, roughly one-third of all high-school graduates currently do not enroll in any form of college. Moreover, while recent increases in the premium have been accompanied by increases in enrollment, college attainment has remained flat. Our paper studies the roles played by college premia, college costs, and risk, ceteris paribus, for college enrollment and attainment in a simple quantitative model of risky college investment. Our results suggest that most U.S. high-school completers are currently inframarginal with respect to the college premium. We find, however, that the levels of current premia, costs, and uninsurable risks all matter for this. Our results imply that, barring improvements in collegiate preparedness and attrition rates, high and persistent college premia, with high attendant levels of earnings inequality, may accompany the shift in demand towards skilled labor, which recent work (e.g., Autor, Levy, and Murnane (2003)) suggests is under way.

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    File URL: http://www.richmondfed.org/publications/research/working_papers/2013/pdf/wp13-02.pdf
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 13-02.

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    Date of creation: 2013
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    Handle: RePEc:fip:fedrwp:13-02

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    1. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Gianluca Violante, 2013. "Education Policy and Intergenerational Transfers in Equilibrium," Working Papers 2013-010, Human Capital and Economic Opportunity Working Group.
    2. Giovanni L. Violante & Costas Meghir & Giovanni Gallipoli, 2008. "Equilibrium Effects of Education Policies: a Quantitative Evaluation," 2008 Meeting Papers 868, Society for Economic Dynamics.
    3. Joseph G. Altonji & Prashant Bharadwaj & Fabian Lange, 2008. "Changes in the Characteristics of American Youth: Implications for Adult Outcomes," NBER Working Papers 13883, National Bureau of Economic Research, Inc.
    4. Todd Schoellman & Lutz Hendricks, 2009. "Student Abilities During the Expansion of U.S. Education, 1950-2000," 2009 Meeting Papers 162, Society for Economic Dynamics.
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