Who Values Access to College?
48 Pages Posted: 25 Feb 2019 Last revised: 29 Apr 2020
Date Written: 2019-02-20
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: Suggested Citation