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Is College a Worthwhile Investment?


  • 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)


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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    Cited by:

    1. repec:eee:cysrev:v:100:y:2019:i:c:p:136-146 is not listed on IDEAS
    2. repec:eee:labeco:v:47:y:2017:i:c:p:48-63 is not listed on IDEAS
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. Kamhöfer, Daniel & Westphal, Matthias, 2018. "Fertility Effects of College Education: Evidence from the German Educational Expansion," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181624, Verein für Socialpolitik / German Economic Association.

    More about this item


    human capital; rate of return; postsecondary schooling;

    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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