IDEAS home Printed from https://ideas.repec.org/a/wly/japmet/v35y2020i7p940-959.html
   My bibliography  Save this article

Perceived and actual option values of college enrollment

Author

Listed:
  • Yifan Gong
  • Todd Stinebrickner
  • Ralph Stinebrickner

Abstract

An important feature of postsecondary schooling is the experimentation that accompanies sequential decision making. Specifically, by entering college, a student gains the option to decide at a future time whether it is optimal to remain in college or to drop out, after resolving uncertainty that existed at entrance about factors that affect the return to college. This paper uses data from the Berea Panel Study to quantify the value of this option. The unique nature of the data allows us to make a distinction between “actual” option values and “perceived” option values and to examine the accuracy of students' perceptions.

Suggested Citation

  • Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner, 2020. "Perceived and actual option values of college enrollment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(7), pages 940-959, November.
    • Handle: RePEc:wly:japmet:v:35:y:2020:i:7:p:940-959
    DOI: 10.1002/jae.2795
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/jae.2795
    Download Restriction: no
    File URL: https://libkey.io/10.1002/jae.2795?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bleemer, Zachary & Zafar, Basit, 2018. "Intended college attendance: Evidence from an experiment on college returns and costs," Journal of Public Economics, Elsevier, vol. 157(C), pages 184-211.
    2. Flavio Cunha & James Heckman & Salvador Navarro, 2005. "Separating uncertainty from heterogeneity in life cycle earnings," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 191-261, April.
    3. Ralph Stinebrickner & Todd Stinebrickner, 2008. "The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using a New Panel Study," American Economic Review, American Economic Association, vol. 98(5), pages 2163-2184, December.
    4. Heckman, James J. & Navarro, Salvador, 2007. "Dynamic discrete choice and dynamic treatment effects," Journal of Econometrics, Elsevier, vol. 136(2), pages 341-396, February.
    5. Wilbert van der Klaauw, 2012. "On the Use of Expectations Data in Estimating Structural Dynamic Choice Models," Journal of Labor Economics, University of Chicago Press, vol. 30(3), pages 521-554.
    6. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Giovanni L. Violante, 2019. "Education Policy and Intergenerational Transfers in Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2569-2624.
    7. Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner, 2019. "Uncertainty about future income: Initial beliefs and resolution during college," Quantitative Economics, Econometric Society, vol. 10(2), pages 607-641, May.
    8. Zachary Bleemer & Basit Zafar, 2014. "Information heterogeneity and intended college enrollment," Staff Reports 685, Federal Reserve Bank of New York.
    9. Ralph Stinebrickner & Todd Stinebrickner, 2014. "Academic Performance and College Dropout: Using Longitudinal Expectations Data to Estimate a Learning Model," Journal of Labor Economics, University of Chicago Press, vol. 32(3), pages 601-644.
    10. Tyler Ransom & Esteban Aucejo & Arnaud Maurel & Peter Arcidiacono, 2014. "College Attrition and the Dynamics of Information Revelation," 2014 Meeting Papers 529, Society for Economic Dynamics.
    11. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 7, pages 307-458, Elsevier.
    12. Todd Stinebrickner & Ralph Stinebrickner, 2012. "Learning about Academic Ability and the College Dropout Decision," Journal of Labor Economics, University of Chicago Press, vol. 30(4), pages 707-748.
    13. Arcidiacono, Peter, 2004. "Ability sorting and the returns to college major," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 343-375.
    14. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 48-83, January.
    15. Ralph Stinebrickner & Todd R. Stinebrickner, 2003. "Understanding Educational Outcomes of Students from Low-Income Families: Evidence from a Liberal Arts College with a Full Tuition Subsidy Program," Journal of Human Resources, University of Wisconsin Press, vol. 38(3).
    16. Matthew Wiswall & Basit Zafar, 2015. "Determinants of College Major Choice: Identification using an Information Experiment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(2), pages 791-824.
    17. D'Haultfoeuille, Xavier & Gaillac, Christophe & Maurel, Arnaud, 2018. "Rationalizing Rational Expectations? Tests and Deviations," IZA Discussion Papers 11989, Institute of Labor Economics (IZA).
    18. Yifan Gong & Lance Lochner & Ralph Stinebrickner & Todd R. Stinebrickner, 2019. "The Consumption Value of College," NBER Working Papers 26335, National Bureau of Economic Research, Inc.
    19. Pamela Giustinelli & Matthew D. Shapiro, 2024. "SeaTE: Subjective Ex Ante Treatment Effect of Health on Retirement," American Economic Journal: Applied Economics, American Economic Association, vol. 16(2), pages 278-317, April.
    20. Matthew Wiswall & Basit Zafar, 2016. "Human Capital Investments and Expectations about Career and Family," NBER Working Papers 22543, National Bureau of Economic Research, Inc.
    21. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
    22. Asher A. Blass & Saul Lach & Charles F. Manski, 2010. "Using Elicited Choice Probabilities To Estimate Random Utility Models: Preferences For Electricity Reliability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 421-440, May.
    23. Brian Jacob & Brian McCall & Kevin Stange, 2018. "College as Country Club: Do Colleges Cater to Students’ Preferences for Consumption?," Journal of Labor Economics, University of Chicago Press, vol. 36(2), pages 309-348.
    24. Ralph Stinebrickner & Todd R. Stinebrickner, 2014. "A Major in Science? Initial Beliefs and Final Outcomes for College Major and Dropout," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(1), pages 426-472.
    25. van der Klaauw, Wilbert & Wolpin, Kenneth I., 2008. "Social security and the retirement and savings behavior of low-income households," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 21-42, July.
    26. Kevin M. Stange, 2012. "An Empirical Investigation of the Option Value of College Enrollment," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 49-84, January.
    27. Pamela Giustinelli & Charles F. Manski & Francesca Molinari, 2019. "Precise or Imprecise Probabilities? Evidence from Survey Response on Late-onset Dementia," NBER Working Papers 26125, National Bureau of Economic Research, Inc.
    28. Manski, Charles F., 1989. "Schooling as experimentation: a reappraisal of the postsecondary dropout phenomenon," Economics of Education Review, Elsevier, vol. 8(4), pages 305-312, August.
    29. Manski, Charles F. & Molinari, Francesca, 2010. "Rounding Probabilistic Expectations in Surveys," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(2), pages 219-231.
    30. Peter Arcidiacono & V. Joseph Hotz & Arnaud Maurel & Teresa Romano, 2020. "Ex Ante Returns and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 128(12), pages 4475-4522.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Romuald Meango & Esther Mirjam Girsberger, 2023. "Identification of Ex ante Returns Using Elicited Choice Probabilities: an Application to Preferences for Public-sector Jobs," Papers 2303.03009, arXiv.org, revised Jun 2024.
    2. Poinas, François & Méango, Romuald, 2023. "The (Option-)Value of Overstaying," TSE Working Papers 23-1478, Toulouse School of Economics (TSE).
    3. Crossley, Thomas F. & Gong, Yifan & Stinebrickner, Ralph & Stinebrickner, Todd, 2022. "The ex post accuracy of subjective beliefs: A new measure and decomposition," Economics Letters, Elsevier, vol. 210(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gong, Yifan & Stinebrickner, Ralph & Stinebrickner, Todd, 2022. "Marriage, children, and labor supply: Beliefs and outcomes," Journal of Econometrics, Elsevier, vol. 231(1), pages 148-164.
    2. Ralph Stinebrickner & Todd Stinebrickner, 2014. "Academic Performance and College Dropout: Using Longitudinal Expectations Data to Estimate a Learning Model," Journal of Labor Economics, University of Chicago Press, vol. 32(3), pages 601-644.
    3. Pamela Giustinelli, 2022. "Expectations in Education: Framework, Elicitation, and Evidence," Working Papers 2022-026, Human Capital and Economic Opportunity Working Group.
    4. Matsuda, Kazushige, 2020. "Optimal timing of college subsidies: Enrollment, graduation, and the skill premium," European Economic Review, Elsevier, vol. 129(C).
    5. Romuald Meango & Esther Mirjam Girsberger, 2023. "Identification of Ex ante Returns Using Elicited Choice Probabilities: an Application to Preferences for Public-sector Jobs," Papers 2303.03009, arXiv.org, revised Jun 2024.
    6. Todd Stinebrickner & Ralph Stinebrickner, 2012. "Learning about Academic Ability and the College Dropout Decision," Journal of Labor Economics, University of Chicago Press, vol. 30(4), pages 707-748.
    7. Kunz, Johannes S. & Staub, Kevin E., 2020. "Early subjective completion beliefs and the demand for post-secondary education," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 34-55.
    8. Johannes S. Kunz & Kevin E. Staub, 2016. "Subjective Completion Beliefs and the Demand for Post-Secondary Education," SOEPpapers on Multidisciplinary Panel Data Research 878, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner & Yuxi Yao, 2022. "The Role of Non-Pecuniary Considerations: Locations Decisions of College Graduates from Low Income Backgrounds," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20221, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    10. Manudeep Bhuller & Philipp Eisenhauer & Moritz Mendel, 2022. "Sequential Choices, Option Values, and the Returns to Education," Papers 2205.05444, arXiv.org, revised Jul 2024.
    11. Romauld Méango, 2023. "Identification of ex ante returns using elicited choice probabilities," Economics Series Working Papers 1007, University of Oxford, Department of Economics.
    12. Xavier D'Haultfoeuille & Christophe Gaillac & Arnaud Maurel, 2021. "Rationalizing rational expectations: Characterizations and tests," Quantitative Economics, Econometric Society, vol. 12(3), pages 817-842, July.
    13. Pamela Giustinelli & Charles F. Manski, 2018. "Survey Measures Of Family Decision Processes For Econometric Analysis Of Schooling Decisions," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 81-99, January.
    14. Lutz Hendricks & Oksana Leukhina, 2018. "The Return To College: Selection And Dropout Risk," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1077-1102, August.
    15. Arpita Patnaik & Matthew J. Wiswall & Basit Zafar, 2020. "College Majors," NBER Working Papers 27645, National Bureau of Economic Research, Inc.
    16. Thomas F. Crossley & Yifan Gong & Todd Stinebrickner & Ralph Stinebrickner, 2021. "Examining Income Expectations in the College and Early Post-College Periods: New Distributional Tests of Rational Expectations," CESifo Working Paper Series 8834, CESifo.
    17. Ralph Stinebrickner & Todd R. Stinebrickner, 2014. "A Major in Science? Initial Beliefs and Final Outcomes for College Major and Dropout," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(1), pages 426-472.
    18. Todd Stinebrickner & Ralph Stinebrickner & Paul Sullivan, 2018. "Job Tasks and the Gender Wage Gap among College Graduates," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20183, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    19. Aina, Carmen & Baici, Eliana & Casalone, Giorgia & Pastore, Francesco, 2018. "The Economics of University Dropouts and Delayed Graduation: A Survey," IZA Discussion Papers 11421, Institute of Labor Economics (IZA).
    20. Timothy N. Bond & George Bulman & Xiaoxiao Li & Jonathan Smith, 2018. "Updating Human Capital Decisions: Evidence from SAT Score Shocks and College Applications," Journal of Labor Economics, University of Chicago Press, vol. 36(3), pages 807-839.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:japmet:v:35:y:2020:i:7:p:940-959. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://www.interscience.wiley.com/jpages/0883-7252/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.