A General Equilibrium Analysis of College Enrollment, Completion, and Labor Market Outcomes

Maria Ferreyra, Angelica Sanchez Diaz and Carlos Garriga (carlos.garriga@stls.frb.org)
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Maria Ferreyra: The World Bank
Angelica Sanchez Diaz: World Bank

No 1282, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: This paper evaluates the general equilibrium effects of alternative college funding regimes, including free college and non-defaultable student loans. Our analysis suggests that the number of years that takes to break-even in the returns to college is substantially lower than in developed economies. Endogenizing the returns to education shows that policies that increase college graduation rates reduce the skill premium. This reduction is magnifi ed by the increase in the compensation to high school graduates, but the quantitative effects are very small and take years to realize. Incentive based-policies are more effective that universal policies like free tuition.

Date: 2018
New Economics Papers: this item is included in nep-dge
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