Is College a Worthwhile Investment?

Posted: 7 Aug 2015  

Lisa Barrow

Federal Reserve Bank of Chicago

Ofer Malamud

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; National Bureau of Economic Research (NBER)

Date Written: August 2015

Abstract

This article surveys the existing evidence on the return to a college education and offers new calculations based on recent data. We focus on an individual’s decision and outline the standard conceptual framework used by economists to analyze investments in education. We then compare alternative estimates of the value of a college education in the literature and reconcile them with our own preferred estimates. We also conduct a selective review of the literature seeking to estimate the causal effects of college on pecuniary and nonpecuniary outcomes. Finally, we provide additional calculations showing the heterogeneity in returns to college across certain institutional and demographic characteristics, review the related academic literature, and discuss the risk associated with a college investment. We conclude that college is certainly a worthwhile investment on average and likely worthwhile for many subgroups, although not necessarily for everyone.

Suggested Citation

Barrow, Lisa and Malamud, Ofer, Is College a Worthwhile Investment? (August 2015). Annual Review of Economics, Vol. 7, pp. 519-555, 2015. Available at SSRN: https://ssrn.com/abstract=2640075 or http://dx.doi.org/10.1146/annurev-economics-080614-115510

Lisa Barrow (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312-322-5073 (Phone)
312-322-2357 (Fax)

Ofer Malamud

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies ( email )

1155 East 60th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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