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Is College a Worthwhile Investment?

Author

Listed:
  • Lisa Barrow

    (Federal Reserve Bank of Chicago, Chicago, Illinois 60604)

  • Ofer Malamud

    (Harris School of Public Policy, University of Chicago, Chicago, Illinois 60637
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

This article surveys the existing evidence on the return to a college education and offers new calculations based on recent data. We focus on an individual's decision and outline the standard conceptual framework used by economists to analyze investments in education. We then compare alternative estimates of the value of a college education in the literature and reconcile them with our own preferred estimates. We also conduct a selective review of the literature seeking to estimate the causal effects of college on pecuniary and nonpecuniary outcomes. Finally, we provide additional calculations showing the heterogeneity in returns to college across certain institutional and demographic characteristics, review the related academic literature, and discuss the risk associated with a college investment. We conclude that college is certainly a worthwhile investment on average and likely worthwhile for many subgroups, although not necessarily for everyone.

Suggested Citation

  • Lisa Barrow & Ofer Malamud, 2015. "Is College a Worthwhile Investment?," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 519-555, August.
    • Handle: RePEc:anr:reveco:v:7:y:2015:p:519-555
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-080614-115510
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    Citations

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    Cited by:

    1. Blumenthal, Anne & Shanks, Trina R., 2019. "Communication matters: A long-term follow-up study of child savings account program participation," Children and Youth Services Review, Elsevier, vol. 100(C), pages 136-146.
    2. Kamhöfer, Daniel A. & Westphal, Matthias, 2017. "Fertility effects of college education: Evidence from the German educational expansion," Ruhr Economic Papers 717, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Leah Achdut & Elad Gutman & Idan Lipiner & Inbal Maayan & Noam Zussman, 2018. "The Wage Premium on Higher Education: Universities and Colleges," Bank of Israel Working Papers 2018.13, Bank of Israel.
    4. Daniel Kamhoefer & Matthias Westphal, 2017. "Fertility Effects of College Education: Evidence from the German Educational Expansion," CINCH Working Paper Series 1705, Universitaet Duisburg-Essen, Competent in Competition and Health.
    5. Gustavo Pereira Serra, 2023. "Household debt, student loan forgiveness, and human capital investment: a neo-Kaleckian approach," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 46(1), pages 173-206, January.
    6. Denning, Jeffrey T. & Eide, Eric R. & Mumford, Kevin J. & Sabey, Daniel J., 2022. "Decreasing time to baccalaureate degree in the United States," Economics of Education Review, Elsevier, vol. 90(C).
    7. Jeffrey T. Denning & Benjamin M. Marx & Lesley J. Turner, 2019. "ProPelled: The Effects of Grants on Graduation, Earnings, and Welfare," American Economic Journal: Applied Economics, American Economic Association, vol. 11(3), pages 193-224, July.
    8. Daniel A Kamhöfer & Hendrik Schmitz & Matthias Westphal, 2019. "Heterogeneity in Marginal Non-Monetary Returns to Higher Education," Journal of the European Economic Association, European Economic Association, vol. 17(1), pages 205-244.
    9. Sørensen, Rune J., 2023. "Educated politicians and government efficiency: Evidence from Norwegian local government," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 163-179.
    10. Sandra E. Black & Jeffrey T. Denning & Lisa J. Dettling & Sarena Goodman & Lesley J. Turner, 2023. "Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being," American Economic Review, American Economic Association, vol. 113(12), pages 3357-3400, December.
    11. Issidor Noumba & Quentin Lebrun Nzouessah Feunke, 2020. "Parental Education, Household Health, and Household Standard of Living: Evidence from Rural Cameroon," International Business Research, Canadian Center of Science and Education, vol. 13(7), pages 113-113, July.
    12. Suqin Ge & Elliott Isaac & Amalia Miller, 2022. "Elite Schools and Opting In: Effects of College Selectivity on Career and Family Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 40(S1), pages 383-427.
    13. Philip Oreopoulos & Reuben Ford, 2019. "Keeping College Options Open: A Field Experiment to Help all High School Seniors Through the College Application Process," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 38(2), pages 426-454, March.
    14. Kristy Fan & Tyler J. Fisher & Andrew A. Samwick, 2021. "The Insurance Value of Financial Aid," NBER Working Papers 28669, National Bureau of Economic Research, Inc.
    15. French, Robert & Oreopoulos, Philip, 2017. "Behavioral barriers transitioning to college," Labour Economics, Elsevier, vol. 47(C), pages 48-63.
    16. de Roux, Nicolás & Riehl, Evan, 2022. "Disrupted academic careers: The returns to time off after high school," Journal of Development Economics, Elsevier, vol. 156(C).
    17. Holger Mueller & Constantine Yannelis, 2022. "Increasing Enrollment in Income‐Driven Student Loan Repayment Plans: Evidence from the Navient Field Experiment," Journal of Finance, American Finance Association, vol. 77(1), pages 367-402, February.
    18. Philip Oreopoulos, 2021. "What Limits College Success? A Review and Further Analysis of Holzer and Baum's Making College Work," Journal of Economic Literature, American Economic Association, vol. 59(2), pages 546-573, June.
    19. Somani, Ravi, 2021. "The returns to higher education and public employment," World Development, Elsevier, vol. 144(C).
    20. Clark, Damon, 2023. "School quality and the return to schooling in Britain: New evidence from a large-scale compulsory schooling reform," Journal of Public Economics, Elsevier, vol. 223(C).
    21. Ghazala Azmat & Jack Britton, 2024. "Labour Market Returns to Higher Education," Post-Print hal-04709561, HAL.

    More about this item

    Keywords

    human capital; rate of return; postsecondary schooling;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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