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Title: Risk Premium and Expectations in Higher Education

Citation Type: Working Paper

Publication Year: 2011

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Abstract: This paper takes the risk of college participation into context when evaluating the return to college education. College dropout and a higher permanent income shock for those who graduate from college accounts for 51% of the excess return to college education. Using a simple risk premium approach, I reconcile the observed high average returns to schooling with relatively low attendance rates. A high dropout risk has two important effects on the estimated average returns to college education: via selection bias and via risk premium.

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Authors: Castex, Gonzalo

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Publication Number: 629

Institution: Central Bank of Chile

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Publisher Location: Santiago, Chile

Data Collections: IPUMS CPS

Topics: Education

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