Sequential Choices, Option Values, and the Returns to Education

Manudeep Bhuller, Philipp Eisenhauer () and Moritz Mendel ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Using detailed Norwegian data on earnings, education and work histories, we estimate a dynamic structural model of education and sector choices that captures rich life-cycle patterns by ability. We validate the model against variation in education choices induced by a compulsory schooling reform. Our approach allows us to estimate the ex-ante returns to different education tracks across the lifecycle by individual ability and quantify the contribution of option values. We find substantial heterogeneity in returns and establish crucial roles for option values and re-enrollment in determining education choices and the impact of schooling policies.

Keywords: sequential decisions; ex-ante returns; option values; reform evaluation (search for similar items in EconPapers)
JEL-codes: D80 J24 J31 (search for similar items in EconPapers)
Pages: 65
Date: 2024-07
New Economics Papers: this item is included in nep-lma
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Working Paper: Sequential Choices, Option Values, and the Returns to Education (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2024_575

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