Is Investing in College Education Risky?

Stacey Chen

Discussion Papers from University at Albany, SUNY, Department of Economics

Abstract: Attending college seems to be a profitable and affordable investment in the US. Nevertheless, a number of academically talented young people still hesitate to attend college. This puzzle motivates this paper to test for whether college education is a risky investment. To measure the riskiness of college attendance, I estimate the risk differential in earnings between college attendees and high school graduates. This paper copes with selection bias problems and distinguishes permanent earnings risk from transitory earnings risks. Evidence indicates that investing in a four-year college education is indeed risky, suggesting that, under certain circumstances, the riskiness of college attendance is an important factor in the schooling choice.

Keywords: Schooling; Risk Differential; Risk Premium; Selection Bias. (search for similar items in EconPapers)
JEL-codes: C25 D81 I2 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (11)

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