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Working Papers

March 2013, No. 13-02R

Risk, the College Premium, and Aggregate Human Capital Investment (Revised November 2018)

Kartik B. Athreya and Janice Eberly

Given the large and rising return to education, the response of human capital investment has been described as comparatively "anemic." This paper shows that dispersion in the likelihood of college noncompletion, and to a lesser extent risks to earnings over the life cycle, may strongly limit the response of aggregate human capital investment to further increases in the U.S. college earnings premium. Under educational conditions reflecting those prevailing currently in the U.S., our results suggest that the continuation of long-standing trends in the skill-bias of technical change (Goldin and Katz, 2008) can be expected primarily to increase earnings and income inequality, rather than college attainment.


Earlier versions of this paper were published under the titles "The Supply of College-Educated Workers: The Roles of College Premia, College Costs, and Risk" and "The College Premium, College Noncompletion, and Human Capital Investment."

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