American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
An Empirical Investigation of the Option Value of College Enrollment
American Economic Journal: Applied Economics
vol. 4,
no. 1, January 2012
(pp. 49–84)
Abstract
This paper quantifies the option value arising from sequential schooling decisions made in the presence of uncertainty and learning about academic ability. College attendance has option value since enrolled students have the option, but not obligation, to continue in school after learning their aptitude and tastes. I estimate that option value accounts for 14 percent of the total value of the opportunity to attend college for the average high school graduate and is greatest for moderate-aptitude students. Students' ability to make decisions sequentially in response to new information increases welfare and also makes educational outcomes less polarized by background. (JEL D83, I23)Citation
Stange, Kevin M. 2012. "An Empirical Investigation of the Option Value of College Enrollment." American Economic Journal: Applied Economics, 4 (1): 49–84. DOI: 10.1257/app.4.1.49Additional Materials
JEL Classification
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- I23 Higher Education and Research Institutions
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