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College Attrition and the Dynamics of Information Revelation

Peter Arcidiacono, Esteban Aucejo, Arnaud Maurel () and Tyler Ransom ()

No 22325, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the role played by informational frictions in college and the workplace. We estimate a dynamic structural model of schooling and work decisions, where individuals have imperfect information about their schooling ability and labor market productivity. We take into account the heterogeneity in schooling investments by distinguishing between two- and four-year colleges, graduate school, as well as science and non-science majors for four-year colleges. Individuals may also choose whether to work full-time, part-time, or not at all. A key feature of our approach is to account for correlated learning through college grades and wages, whereby individuals may leave or re-enter college as a result of the arrival of new information on their ability and productivity. Our findings indicate that the elimination of informational frictions would increase the college graduation rate by 9 percentage points, and would increase the college wage premium by 32.7 percentage points through increased sorting on ability.

JEL-codes: C35 D83 J24 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-edu and nep-lma
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Working Paper: College Attrition and the Dynamics of Information Revelation (2014) Downloads
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