Federal Reserve Bank of Richmond
Who Values Access to College?
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.
Cite this item
Kartik B. Athreya & Felicia Ionescu & Urvi Neelakantan & Ivan Vidangos, Who Values Access to College?, Federal Reserve Bank of Richmond, Working Paper 19-5, 20 Feb 2019.
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
Keywords: Human Capital; Higher Education; Financial Investment
This item with handle RePEc:fip:fedrwp:19-05
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