The Return to College: Selection and Dropout Risk

26 Pages Posted: 20 Aug 2018

See all articles by Lutz Hendricks

Lutz Hendricks

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

Oksana Leukhina

Federal Reserve Bank of St Louis

Multiple version iconThere are 2 versions of this paper

Date Written: August 2018

Abstract

This article 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 these data, the model infers a large ability gap between college graduates and high school graduates that accounts for 59% of the college lifetime earnings premium.

Suggested Citation

Hendricks, Lutz and Leukhina, Oksana, The Return to College: Selection and Dropout Risk (August 2018). International Economic Review, Vol. 59, Issue 3, pp. 1077-1102, 2018. Available at SSRN: https://ssrn.com/abstract=3233196 or http://dx.doi.org/10.1111/iere.12297

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

Federal Reserve Bank of St Louis ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States

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