Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282712 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 16585
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We examine how informational frictions impact schooling and work outcomes. To do so, we estimate a dynamic structural model where individuals face uncertainty about their academic ability and productivity, which respectively determine their schooling utility and wages. Our framework accounts for heterogeneity in college types and majors, as well as occupational search frictions and work hours. Individuals learn from grades and wages in a correlated manner, and may change their choices as a result. Removing informational frictions would increase the college graduation rate by 4.4 percentage points, which would increase further by 2 percentage points in the absence of search frictions. Providing students with full information about their abilities would also result in large increases in the college and white-collar wage premia, while reducing the college graduation gap by family income.
Subjects: 
college dropout
dynamic discrete choice
learning
human capital
JEL: 
C35
D83
J24
Document Type: 
Working Paper

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