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College Attrition and the Dynamics of Information Revelation

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  • Peter Arcidiacono
  • Esteban Aucejo
  • Arnaud Maurel
  • Tyler Ransom

Abstract

This paper investigates the role played by informational frictions in college and the workplace. We estimate a dynamic structural model of schooling and work decisions, where individuals have imperfect information about their schooling ability and labor market productivity. We take into account the heterogeneity in schooling investments by distinguishing between two- and four-year colleges, graduate school, as well as science and non-science majors for four-year colleges. Individuals may also choose whether to work full-time, part-time, or not at all. A key feature of our approach is to account for correlated learning through college grades and wages, whereby individuals may leave or re-enter college as a result of the arrival of new information on their ability and productivity. Our findings indicate that the elimination of informational frictions would increase the college graduation rate by 9 percentage points, and would increase the college wage premium by 32.7 percentage points through increased sorting on ability.

Suggested Citation

  • Peter Arcidiacono & Esteban Aucejo & Arnaud Maurel & Tyler Ransom, 2016. "College Attrition and the Dynamics of Information Revelation," NBER Working Papers 22325, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22325
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    More about this item

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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