This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Risk, the College Premium, and Aggregate Human Capital Investment

  • Kartik Athreya
  • Janice Eberly
American Economic Journal: Macroeconomics
vol. 13, no. 2, April 2021
(pp. 168–213)
Download Full Text PDF

Abstract

Despite increases in the college earnings premium to persistently high levels, investment in college education remains low. We can understand this apparent puzzle by considering the risk of attending college and, in particular, the possibility of failing to graduate. Students with a reasonable probability of completing college already enroll, and for those who do not enroll, the low chance of completion blunts the impact of the rising college premium. In the absence of improved college readiness, our quantitative results suggest that continuing long-standing trends in skill-biased technological change can be expected primarily to increase earnings inequality rather than college attainment.

Citation

Athreya, Kartik, and Janice Eberly. 2021. "Risk, the College Premium, and Aggregate Human Capital Investment." American Economic Journal: Macroeconomics 13 (2): 168–213. DOI: 10.1257/mac.20160396

Additional Materials

JEL Classification

  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • I22 Educational Finance; Financial Aid
  • I23 Higher Education; Research Institutions
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • O33 Technological Change: Choices and Consequences; Diffusion Processes