Is College Worth It? The Economic Return to College Adjusted for Dropouts, Taxes, and Risk

34 Pages Posted: 11 Feb 2017

See all articles by Alan Benson

Alan Benson

University of Minnesota - Twin Cities - Carlson School of Management; Massachusetts Institute of Technology (MIT)

Raimundo Esteva

Independent

Frank S. Levy

Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning

Date Written: January 26, 2015

Abstract

Most published estimates of the economic return to college rest on a series of best-case assumptions that often overstate returns and, most importantly, obscure differences in return across different institutions. We simulate the economic return to college under more realistic assumptions using U.S. Census data combined with administrative data from the more selective University of California system and the less selective California State University system. We find that college in 2010 is a risker investment than in earlier decades. Many students - particularly young men who cannot access top-tier universities - face an economic return on college that, while positive on average, can reasonably inspire caution among students and their parents due, in part, to high dropout rates. While our results are based on California data, we site research showing similar distinctions among higher and lower tier institutions exist nationwide. Our simulations can be seen as a natural extension of the Obama administration’s attempt to create a College Scorecard.

Keywords: Higher education, general skills

JEL Classification: I21, J24

Suggested Citation

Benson, Alan and Esteva, Raimundo and Levy, Frank S., Is College Worth It? The Economic Return to College Adjusted for Dropouts, Taxes, and Risk (January 26, 2015). Available at SSRN: https://ssrn.com/abstract=2555950 or http://dx.doi.org/10.2139/ssrn.2555950

Alan Benson (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://https://sites.google.com/site/amb263/

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

HOME PAGE: http://web.mit.edu/alanmb/www/index.htm

Raimundo Esteva

Independent ( email )

Frank S. Levy

Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning ( email )

77 Massachusetts Avenue
Room 9-316
Cambridge, MA 02139
United States
617-253-2089 (Phone)

HOME PAGE: http://dusp.mit.edu/faculty/frank-levy

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