College Attrition and the Dynamics of Information Revelation

69 Pages Posted: 15 Jun 2016 Last revised: 30 Jul 2016

Peter Arcidiacono

Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Esteban M. Aucejo

London School of Economics & Political Science (LSE)

Arnaud Maurel

Duke University - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Tyler Ransom

Duke University - Social Science Research Institute

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2016

Abstract

This paper investigates the role played by informational frictions in college and the workplace. We estimate a dynamic structural model of schooling and work decisions, where individuals have imperfect information about their schooling ability and labor market productivity. We take into account the heterogeneity in schooling investments by distinguishing between two- and four-year colleges, graduate school, as well as science and non-science majors for four-year colleges. Individuals may also choose whether to work full-time, part-time, or not at all. A key feature of our approach is to account for correlated learning through college grades and wages, whereby individuals may leave or re-enter college as a result of the arrival of new information on their ability and productivity. Our findings indicate that the elimination of informational frictions would increase the college graduation rate by 9 percentage points, and would increase the college wage premium by 32.7 percentage points through increased sorting on ability.

JEL Classification: C35; D83; J24

Suggested Citation

Arcidiacono, Peter and Aucejo, Esteban M. and Maurel, Arnaud and Ransom, Tyler, College Attrition and the Dynamics of Information Revelation (May 31, 2016). Economic Research Initiatives at Duke (ERID) Working Paper No. 222. Available at SSRN: https://ssrn.com/abstract=2795773

Peter Arcidiacono (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Esteban M. Aucejo

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Arnaud Maurel

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Tyler Ransom

Duke University - Social Science Research Institute ( email )

Campus Box 90989
Durham, NC 27708
United States

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