Author(s)  
Lutz Hendricks
Oksana Leukhina

This article studies the effect of graduating from college on lifetime earnings. We develop a quantitative model of college choice with uncertain graduation. Departing from much of the literature, we model in detail how students progress through college. This allows us to parameterize the model using transcript data. College transcripts reveal substantial and persistent heterogeneity in students' credit accumulation rates that are strongly related to graduation outcomes. From this data, the model infers a large ability gap between college graduates and high school graduates that accounts for 59 percent of the college lifetime earnings premium.

Publication Type  
Article
Journal  
International Economic Review
Volume  
59
Issue Number  
3
Pages  
1077-1102
JEL Codes  
I23: Higher Education and Research Institutions
E50: Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Keywords  
education
college premium
college dropout risk