Stepping Stone and Option Value in a Model of Postsecondary Education

Nicholas Trachter

No 14-3, Working Paper from Federal Reserve Bank of Richmond

Abstract: A stepping stone arises in risky environments with learning and transferable human capital. An example is the role played by academic two-year colleges in postsecondary education: Students, as they learn about the uncertain educational outcomes, can drop out or transfer up to harder and more rewarding schools, carrying a fraction of the accumulated human capital. A theory of education is built and contrasted empirically to find that i) option value explains a large part of returns to enrollment, ii) enrollment in academic two-year colleges is driven by the option to transfer up, and iii) the value of the stepping stone is small.

Keywords: stepping stone; investment under uncertainty; academic learning; postsecondary education; college education; returns to education (search for similar items in EconPapers)
JEL-codes: D83 I21 J24 (search for similar items in EconPapers)
Pages: 91 pages
Date: 2014-02-04
New Economics Papers: this item is included in nep-edu and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.richmondfed.org/publications/research/w ... 2014/pdf/wp14-03.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.richmondfed.org/publications/research/working_papers/2014/pdf/wp14-03.pdf [301 Moved Permanently]--> https://www.richmondfed.org/publications/research/working_papers/2014/pdf/wp14-03.pdf)

Related works:
Journal Article: Stepping stone and option value in a model of postsecondary education (2015)
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:fip:fedrwp:14-03

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().