The Return to College: Selection and Dropout Risk

67 Pages Posted: 4 Nov 2014

See all articles by Lutz Hendricks

Lutz Hendricks

UNC Chapel Hill; CESifo (Center for Economic Studies and Ifo Institute)

Oksana Leukhina

University of Washington

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2014

Abstract

This paper studies the effect of graduating from college on lifetime earnings. We develop a quantitative model of college choice with uncertain graduation. Departing from much of the literature, we model in detail how students progress through college. This allows us to parameterize the model using transcript data. College transcripts reveal substantial and persistent heterogeneity in students’ credit accumulation rates that are strongly related to graduation outcomes. From this data, the model infers a large ability gap between college graduates and high school graduates that accounts for 54% of the college lifetime earnings premium.

Keywords: Education, College premium, College dropout risk

JEL Classification: E24, J24, I21

Suggested Citation

Hendricks, Lutz and Leukhina, Oksana, The Return to College: Selection and Dropout Risk (November 1, 2014). CFS Working Paper, No. 487. Available at SSRN: https://ssrn.com/abstract=2518430 or http://dx.doi.org/10.2139/ssrn.2518430

Lutz Hendricks (Contact Author)

UNC Chapel Hill ( email )

Chapel Hill, NC 27599
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Oksana Leukhina

University of Washington ( email )

Seattle, WA 98195
United States

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