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Risk, the College Premium, and Aggregate Human Capital Investment†

Risk, the College Premium, and Aggregate Human Capital Investment† AbstractDespite increases in the college earnings premium to persistently high levels, investment in college education remains low. We can understand this apparent puzzle by considering the risk of attending college and, in particular, the possibility of failing to graduate. Students with a reasonable probability of completing college already enroll, and for those who do not enroll, the low chance of completion blunts the impact of the rising college premium. In the absence of improved college readiness, our quantitative results suggest that continuing long-standing trends in skill-biased technological change can be expected primarily to increase earnings inequality rather than college attainment. (JEL E24, I22, I23, J24, J31, O33) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Macroeconomics American Economic Association

Risk, the College Premium, and Aggregate Human Capital Investment†

Risk, the College Premium, and Aggregate Human Capital Investment†

American Economic Journal: Macroeconomics , Volume 13 (2) – Apr 1, 2021

Abstract

AbstractDespite increases in the college earnings premium to persistently high levels, investment in college education remains low. We can understand this apparent puzzle by considering the risk of attending college and, in particular, the possibility of failing to graduate. Students with a reasonable probability of completing college already enroll, and for those who do not enroll, the low chance of completion blunts the impact of the rising college premium. In the absence of improved college readiness, our quantitative results suggest that continuing long-standing trends in skill-biased technological change can be expected primarily to increase earnings inequality rather than college attainment. (JEL E24, I22, I23, J24, J31, O33)

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Publisher
American Economic Association
Copyright
Copyright © 2021 © American Economic Association
ISSN
1945-7715
DOI
10.1257/mac.20160396
Publisher site
See Article on Publisher Site

Abstract

AbstractDespite increases in the college earnings premium to persistently high levels, investment in college education remains low. We can understand this apparent puzzle by considering the risk of attending college and, in particular, the possibility of failing to graduate. Students with a reasonable probability of completing college already enroll, and for those who do not enroll, the low chance of completion blunts the impact of the rising college premium. In the absence of improved college readiness, our quantitative results suggest that continuing long-standing trends in skill-biased technological change can be expected primarily to increase earnings inequality rather than college attainment. (JEL E24, I22, I23, J24, J31, O33)

Journal

American Economic Journal: MacroeconomicsAmerican Economic Association

Published: Apr 1, 2021

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