An Empirical Investigation of the Option Value of College Enrollment

Kevin Stange

American Economic Journal: Applied Economics, 2012, vol. 4, issue 1, 49-84

Abstract: This paper quantifies the option value arising from sequential schooling decisions made in the presence of uncertainty and learning about academic ability. College attendance has option value since enrolled students have the option, but not obligation, to continue in school after learning their aptitude and tastes. I estimate that option value accounts for 14 percent of the total value of the opportunity to attend college for the average high school graduate and is greatest for moderate-aptitude students. Students' ability to make decisions sequentially in response to new information increases welfare and also makes educational outcomes less polarized by background. (JEL D83, I23)

JEL-codes: D83 I23 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/app.4.1.49
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (113)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/app.4.1.49 (application/pdf)
http://www.aeaweb.org/aej/app/data/2010-0313_data.zip (application/zip)
http://www.aeaweb.org/aej/app/app/2010-0313_app.pdf (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejapp:v:4:y:2012:i:1:p:49-84

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Applied Economics is currently edited by Alexandre Mas

More articles in American Economic Journal: Applied Economics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().