Who Values Access to College?

46 Pages Posted: 25 Feb 2019

See all articles by Kartik Athreya

Kartik Athreya

Federal Reserve Banks - Federal Reserve Bank of Richmond

Felicia Ionescu

Board of Governors of the Federal Reserve System

Urvi Neelakantan

Federal Reserve Banks - Federal Reserve Bank of Richmond

Ivan Vidangos

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: 2019-02-20

Abstract

At first glance, college appears to be of great value to most, given its mean returns and sharply subsidized tuition. An empirically-disciplined human capital model that allows for variation in college readiness suggests otherwise: Nearly half of high school completers place zero value on access to college. This renders blanket subsidies potentially inefficient. As proof of principle, we show that redirecting subsidies away from those who would nonetheless enroll--towards a stock index retirement fund for those who do not even when college is subsidized--increases ex-ante welfare by 1 percent of mean consumption, while preserving enrollment and budget neutrality.

Keywords: Human Capital, Higher Education, Financial Investment

JEL Classification: E21, G11, I24

Suggested Citation

Athreya, Kartik and Ionescu, Felicia and Neelakantan, Urvi and Vidangos, Ivan, Who Values Access to College? (2019-02-20). FRB Richmond Working Paper No. 19-5. Available at SSRN: https://ssrn.com/abstract=3340181

Kartik Athreya (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Felicia Ionescu

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Urvi Neelakantan

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Ivan Vidangos

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
4
Abstract Views
54
PlumX Metrics