Risk, the College Premium, and Aggregate Human Capital Investment

Kartik Athreya and Janice Eberly

American Economic Journal: Macroeconomics, 2021, vol. 13, issue 2, 168-213

Abstract: Despite increases in the college earnings premium to persistently high levels, investment in college education remains low. We can understand this apparent puzzle by considering the risk of attending college and, in particular, the possibility of failing to graduate. Students with a reasonable probability of completing college already enroll, and for those who do not enroll, the low chance of completion blunts the impact of the rising college premium. In the absence of improved college readiness, our quantitative results suggest that continuing long-standing trends in skill-biased technological change can be expected primarily to increase earnings inequality rather than college attainment.

JEL-codes: E24 I22 I23 J24 J31 O33 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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DOI: 10.1257/mac.20160396

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