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  3. American Economic Review
  4. May 2011
  5. Estimating the Ex Ante Expected Returns to College

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Estimating the Ex Ante Expected Returns to College

  • Andrew J. Hussey
  • Omari H. Swinton
American Economic Review
vol. 101, no. 3, May 2011
(pp. 598–602)
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Abstract

Rather than estimating the returns to obtaining a college degree, this paper treats the college education decision as an uncertain investment involving varying likelihoods of successful graduation. We predict earnings conditional on both graduating and not graduating from both selective and non-selective institutions, and incorporate estimated individual-specific graduation rates in calculating the ex ante expected returns from college attendance for individuals across the ability distribution. Our results suggest that, especially for lower ability students, ex ante returns may differ substantially from typical estimates of the returns to a college degree, and typical estimates of the selectivity premium may be underestimated.

Citation

Hussey, Andrew J., and Omari H. Swinton. 2011. "Estimating the Ex Ante Expected Returns to College." American Economic Review 101 (3): 598–602. DOI: 10.1257/aer.101.3.598

JEL Classification

  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials