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Who Values Access to College?

Kartik Athreya (), Felicia Ionescu (), Urvi Neelakantan and Ivan Vidangos

No 19-5, Working Paper from Federal Reserve Bank of Richmond

Abstract: At first glance, college appears to be of great value to most, given its mean returns and sharply subsidized tuition. An empirically-disciplined human capital model that allows for variation in college readiness suggests otherwise: Nearly half of high school completers place zero value on access to college. This renders blanket subsidies potentially inefficient. As proof of principle, we show that redirecting subsidies away from those who would nonetheless enroll--towards a stock index retirement fund for those who do not even when college is subsidized--increases ex-ante welfare by 1 percent of mean consumption, while preserving enrollment and budget neutrality.

Keywords: Human Capital; Higher Education; Financial Investment (search for similar items in EconPapers)
JEL-codes: E21 G11 I24 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2019-02-20
New Economics Papers: this item is included in nep-fle
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