Direct Marginal Productivity of College Education in Relation to College Aptitude of Students and Production Costs of Institutions

Andre Daniere and Jerry Mechling

Journal of Human Resources, 1970, vol. 5, issue 1, 51-70

Abstract: By combining a variety of data sources, the authors arrive at cautious estimates of expected earnings flows and their present values for students of different college aptitude entering institutions of different "quality." When linked to estimates of alternative earnings and production costs of college education, these figures provide marginal decision criteria for the reallocation (or additional allocation) of resources in college education. A rough policy implication of the benefit-cost ratios is that additional college places should go in preference to students of higher college aptitude and should be created in low-cost institutions. One of the more surprising results is that we apparently have gone too far in the policy, or market outcome, which consists of placing high aptitude students in high quality colleges and lower aptitude students in inferior institutions. These conclusions hold as long as increases in measured national product are the only objective and college expansion is controlled by the amount of funds made available for it. New conclusions emerge if the drag on expansion is associated with tuition and student financial aid policies and, again, if equalization of opportunities enters as an additional objective.

Date: 1970
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