Family Heterogeneity, Human Capital Investment, and College Attainment
- American Economic Journal: Macroeconomics (Forthcoming)
From 1995 to 2015, the aggregate college completion rate in the U.S.
increased almost 50%. Yet, completion trends differed markedly for
individuals from different family backgrounds. This paper considers the extent to which trends in college preparedness contributed
to the growth in aggregate completion, as well as the variation in
completion trends across family backgrounds. We first document
parallel empirical patterns in pre-college investments, college preparedness, and college completion. We then evaluate the quantitative importance of pre-college investments and preparedness for
completion trends in a structural model of intergenerational human
capital investment with heterogeneous families. Within our model,
the human capital investment channel generates half of the empirical increase in college completion, while the changing composition
of family types generates about one-fourth of the increase. In policy experiments, we find that subsidizing pre-college investment for
low resource families has a larger impact on college completion and
lifetime earnings compared to alternative interventions like tuition
subsidies or cash transfers.
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