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Is Investing College Education Risky?

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Author Info
Stacey H. Chen (SUNY at Albany)

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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.

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File URL: http://129.3.20.41/eps/lab/papers/0202/0202001.pdf
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Publisher Info
Paper provided by EconWPA in its series Labor and Demography with number 0202001.

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Date of creation: 03 Feb 2002
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Handle: RePEc:wpa:wuwpla:0202001

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Web page: http://129.3.20.41

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Related research
Keywords: riskiness; education; selection bias;

Other versions of this item:

Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
I2 - Health, Education, and Welfare - - Education

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    Other versions:
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    Other versions:
  3. Ekaterini Kyriazidou, 1997. "Estimation of a Panel Data Sample Selection Model," Econometrica, Econometric Society, vol. 65(6), pages 1335-1364, November.
  4. Shea, John, 2000. "Does parents' money matter?," Journal of Public Economics, Elsevier, vol. 77(2), pages 155-184, August. [Downloadable!] (restricted)
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  7. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 48-83, January. [Downloadable!] (restricted)
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  8. David Card, 1994. "Earnings, Schooling, and Ability Revisited," NBER Working Papers 4832, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Costas Meghir & Mårten Palme, 1999. "Assessing the effect of schooling on earnings using a social experiment," IFS Working Papers W99/10, Institute for Fiscal Studies. [Downloadable!]
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  10. Blundell, Richard & M. Stoker, Thomas, 1999. "Consumption and the timing of income risk," European Economic Review, Elsevier, vol. 43(3), pages 475-507, March. [Downloadable!] (restricted)
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  11. Olson, Lawrence & White, Halbert & Shefrin, H M, 1979. "Optimal Investment in Schooling when Incomes are Risky," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 522-39, June. [Downloadable!] (restricted)
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  16. Campbell, John Y, 1996. "Understanding Risk and Return," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 298-345, April. [Downloadable!] (restricted)
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  17. Acemoglu, Daron & Pischke, J. -S., 2001. "Changes in the wage structure, family income, and children's education," European Economic Review, Elsevier, vol. 45(4-6), pages 890-904, May. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Philip Oreopoulos, 2003. "Do Dropouts Drop Out Too Soon? Evidence from Changes in School-Leaving Laws," Working Papers oreo-03-01, University of Toronto, Department of Economics. [Downloadable!]
  2. Philip Oreopoulos, 2003. "Do Dropouts Drop Out Too Soon? International Evidence From Changes in School-Leaving Laws," NBER Working Papers 10155, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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