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Who Values Access to College?

Author

Listed:
  • Athreya, Kartik B.

    (Federal Reserve Bank of Richmond)

  • Ionescu, Felicia

    (Federal Reserve Board of Governors)

  • Neelakantan, Urvi

    (CAFRAL and Federal Reserve Bank of Richmond)

  • Vidangos, Ivan

    (Federal Reserve Board of Governors)

Abstract

At first glance, college appears to be of great value to most, given its mean returns and sharply subsidized tuition. An empirically-disciplined human capital model that allows for variation in college readiness suggests otherwise: Nearly half of high school completers place zero value on access to college. This renders blanket subsidies potentially inefficient. As proof of principle, we show that redirecting subsidies away from those who would nonetheless enroll--towards a stock index retirement fund for those who do not even when college is subsidized--increases ex-ante welfare by 1 percent of mean consumption, while preserving enrollment and budget neutrality.

Suggested Citation

  • Athreya, Kartik B. & Ionescu, Felicia & Neelakantan, Urvi & Vidangos, Ivan, 2019. "Who Values Access to College?," Working Paper 19-5, Federal Reserve Bank of Richmond.
  • Handle: RePEc:fip:fedrwp:19-05
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    References listed on IDEAS

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    More about this item

    Keywords

    Human Capital; Higher Education; Financial Investment;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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