Is Investing College Education Risky?

Stacey Chen ()

Labor and Demography from EconWPA

Abstract: Attending college seems to be a profitable and affordable investment in the US. Nevertheless, a number of academically talented young people still hesitate to attend college. This puzzle motivates this paper to test for whether college education is a risky investment. To measure the riskiness of college attendance, I estimate the risk differential in earnings between college attendees and high school graduates. This paper copes with selection bias problems and distinguishes permanent earnings risk from transitory earnings risks. Evidence indicates that investing in a four-year college education is indeed risky, suggesting that, under certain circumstances, the riskiness of college attendance is an important factor in the schooling choice.

Keywords: riskiness; education; selection bias (search for similar items in EconPapers)
JEL-codes: D81 C25 I2 (search for similar items in EconPapers)
Date: 2002-02-03
Note: Type of Document - LaTex; prepared on PC; to print on HP;
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpla:0202001

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