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College Attrition and the Dynamics of Information Revelation

Author

Listed:
  • Arcidiacono, Peter

    (Duke University)

  • Aucejo, Esteban

    (London School of Economics)

  • Maurel, Arnaud

    (Duke University)

  • Ransom, Tyler

    (University of Oklahoma)

Abstract

We examine how informational frictions impact schooling and work outcomes. To do so, we estimate a dynamic structural model where individuals face uncertainty about their academic ability and productivity, which respectively determine their schooling utility and wages. Our framework accounts for heterogeneity in college types and majors, as well as occupational search frictions and work hours. Individuals learn from grades and wages in a correlated manner, and may change their choices as a result. Removing informational frictions would increase the college graduation rate by 4.4 percentage points, which would increase further by 2 percentage points in the absence of search frictions. Providing students with full information about their abilities would also result in large increases in the college and white-collar wage premia, while reducing the college graduation gap by family income.

Suggested Citation

  • Arcidiacono, Peter & Aucejo, Esteban & Maurel, Arnaud & Ransom, Tyler, 2023. "College Attrition and the Dynamics of Information Revelation," IZA Discussion Papers 16585, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16585
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    More about this item

    Keywords

    college dropout; dynamic discrete choice; learning; human capital;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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