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Title: Investment Opportunities and Economic Outcomes: Who Benefits From College and the Stock Market?

Citation Type: Miscellaneous

Publication Year: 2018

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Abstract: Two investments stand out for their power to improve economic outcomes: higher education and stocks. Absent public funding, though, both are seen as the preserve of the wealthy. As a result, higher education in particular is, in many countries, heavily subsidized with the explicit aim of promoting equality of opportunity. However, differences in characteristics are likely to affect individuals' capacity to take advantage of investment opportunities and improve their economic well-being. Our goal in this project is therefore to study the effect of access to college and the stock market on individual earnings, wealth, mobility, and inequality using a model that derives empirically-plausible measures of ex-ante heterogeneity in learning ability, initial human capital, and initial wealth. Does the power of college to increase well-being exceed that of stocks, as large subsidies to the former suggest? Perhaps not: we show that college does improve economic outcomes, but only for those whose ability and preparedness poise them for success. Stocks, on the other hand, may improve economic outcomes for those whose endowments make human capital investment a relatively unattractive option.

Url: https://www.brookings.edu/wp-content/uploads/2018/01/urvi-neelakantan-seminar-paper.pdf

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Authors: Athreya, Kartik; Ionescu, Felicia; Neelakantan, Urvi; Vidangos, Ivan

Publisher: Federal Reserve Board, Richmond

Data Collections: IPUMS CPS

Topics: Education, Labor Force and Occupational Structure, Migration and Immigration, Poverty and Welfare

Countries: United States