Advanced Search
MyIDEAS: Login to save this paper or follow this series

Is Investing in College Education Risky?

Contents:

Author Info

  • Stacey Chen

Abstract

Attending college seems to be a profitable and affordable investment in the US. Nevertheless, a number of academically talented young people still hesitate to attend college. This puzzle motivates this paper to test for whether college education is a risky investment. To measure the riskiness of college attendance, I estimate the risk differential in earnings between college attendees and high school graduates. This paper copes with selection bias problems and distinguishes permanent earnings risk from transitory earnings risks. Evidence indicates that investing in a four-year college education is indeed risky, suggesting that, under certain circumstances, the riskiness of college attendance is an important factor in the schooling choice.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.albany.edu/economics/research/workingp/2001/Risky.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University at Albany, SUNY, Department of Economics in its series Discussion Papers with number 01-09.

as in new window
Length:
Date of creation: 2001
Date of revision:
Handle: RePEc:nya:albaec:01-09

Contact details of provider:
Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Phone: (518) 442-4735
Fax: (518) 442-4736

Order Information:
Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Email:
Web: http://www.albany.edu/economics/research/workingp/index.shtml

Related research

Keywords: Schooling; Risk Differential; Risk Premium; Selection Bias.;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Taber, Christopher R., 2000. "Semiparametric identification and heterogeneity in discrete choice dynamic programming models," Journal of Econometrics, Elsevier, Elsevier, vol. 96(2), pages 201-229, June.
  2. Campbell, John Y, 1996. "Understanding Risk and Return," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(2), pages 298-345, April.
  3. Meghir, Costas & Palme, Mårten, 1999. "Assessing the Effect of Schooling on Earnings Using a Social Experiment," Working Paper Series in Economics and Finance 313, Stockholm School of Economics.
  4. Joseph G. Altonji, 1991. "The Demand for and Return to Education When Education Outcomes are Uncertain," NBER Working Papers 3714, National Bureau of Economic Research, Inc.
  5. Angrist, Joshua D & Newey, Whitney K, 1991. "Over-Identification Tests in Earnings Functions with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 9(3), pages 317-23, July.
  6. Stephen Cameron & Christopher Taber, 2000. "Borrowing Constraints and the Returns to Schooling," NBER Working Papers 7761, National Bureau of Economic Research, Inc.
  7. Richard Blundell & Ian Preston, 1998. "Consumption Inequality And Income Uncertainty," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(2), pages 603-640, May.
  8. Weiss, Yoram, 1972. "The Risk Element in Occupational and Educational Choices," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(6), pages 1203-13, Nov.-Dec..
  9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  10. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, American Economic Association, vol. 64(6), pages 950-63, December.
  11. Shea, John, 2000. "Does parents' money matter?," Journal of Public Economics, Elsevier, Elsevier, vol. 77(2), pages 155-184, August.
  12. Ekaterini Kyriazidou, 1997. "Estimation of a Panel Data Sample Selection Model," Econometrica, Econometric Society, Econometric Society, vol. 65(6), pages 1335-1364, November.
  13. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
  14. Kane, Thomas J, 1994. "College Entry by Blacks since 1970: The Role of College Costs, Family Background, and the Returns to Education," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(5), pages 878-911, October.
  15. Orazio Attanasio & Steven J. Davis, 1994. "Relative Wage Movements and the Distribution of Consumption," NBER Working Papers 4771, National Bureau of Economic Research, Inc.
  16. Blundell, Richard & M. Stoker, Thomas, 1999. "Consumption and the timing of income risk," European Economic Review, Elsevier, Elsevier, vol. 43(3), pages 475-507, March.
  17. Olson, Lawrence & White, Halbert & Shefrin, H M, 1979. "Optimal Investment in Schooling when Incomes are Risky," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(3), pages 522-39, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Migali, Giuseppe, 2012. "Funding higher education and wage uncertainty: Income contingent loan versus mortgage loan," Economics of Education Review, Elsevier, Elsevier, vol. 31(6), pages 871-889.
  2. Joop Hartog & Luis Díaz-Serrano, 2007. "Earnings risk and demand for higher education: A cross-section test for Spain," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 1-28, May.
  3. Philip Oreopoulos, 2006. "Estimating Average and Local Average Treatment Effects of Education when Compulsory Schooling Laws Really Matter," American Economic Review, American Economic Association, American Economic Association, vol. 96(1), pages 152-175, March.
  4. Eckel, Catherine & Johnson, Cathleen & Montmarquette, Claude, 2012. "Human capital investment by the poor: Informing policy with laboratory experiments," MPRA Paper 47782, University Library of Munich, Germany.
  5. Migali, Giuseppe, 2006. "Funding Higher Education and Wage Uncertainty: Income Contingent Loan Versus Mortgate Loan," The Warwick Economics Research Paper Series (TWERPS) 740, University of Warwick, Department of Economics.
  6. Diaz-Serrano, L. & Hartog, J. & Skyt Nielsen, H., 2003. "Compensating Wage Differentials for Schooling Risk in Denmark," Economics, Finance and Accounting Department Working Paper Series, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth n1271003, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nya:albaec:01-09. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John Bailey Jones).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.