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The Return to College: Selection and Dropout Risk

Author

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  • Lutz Hendricks

    () (University of North Carolina, Chapel Hill)

  • Oksana Leukhina

    () (University of Washington)

Abstract

This paper studies the effect of graduating from college on lifetime earnings. We develop a quantitative model of college choice with uncertain graduation. Departing from much of the literature, we model in detail how students progress through college. This allows us to parameterize the model using transcript data. College transcripts reveal substantial and persistent heterogeneity in students’ credit accumulation rates that are strongly related to graduation outcomes. From this data, the model infers a large ability gap between college graduates and high school graduates that accounts for 54% of the college lifetime earnings premium.

Suggested Citation

  • Lutz Hendricks & Oksana Leukhina, 2015. "The Return to College: Selection and Dropout Risk," Working Papers 2015-013, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2015-013
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lutz Hendricks & Oksana Leukhina, 2017. "How Risky is College Investment?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 140-163, October.
    2. Lutz Hendricks & Oksana Leukhina, 2017. "How Risky is College Investment?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 140-163, October.
    3. Kartik Athreya & Felicia Ionescu & Ivan Vidangos & Urvi Neelakantan, 2018. "Investment Opportunities and Economic Outcomes: Who Benefits From College and the Stock Market?," 2018 Meeting Papers 1151, Society for Economic Dynamics.
    4. Athreya, Kartik B. & Ionescu, Felicia & Neelakantan, Urvi & Vidangos, Ivan, 2019. "Who Values Access to College?," Working Paper 19-5, Federal Reserve Bank of Richmond.
    5. repec:eee:labeco:v:54:y:2018:i:c:p:14-28 is not listed on IDEAS
    6. Ozdagli, Ali K. & Trachter, Nicholas, 2014. "The Dropout Option in a Simple Model of College Education," Economic Quarterly, Federal Reserve Bank of Richmond, issue 4Q, pages 279-295.

    More about this item

    Keywords

    education; college premium; college dropout risk;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • 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

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