Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/124970 
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers No. 9445
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
Despite a robust college premium, college attendance rates in the US have remained stagnant and exhibit a substantial socioeconomic gradient. We focus on information gaps – specifically, incomplete information about college benefits and costs – as a potential explanation for these patterns. For this purpose, we conduct an information experiment about college returns and costs embedded within a representative survey of US household heads. We show that, at the baseline, perceptions of college costs and benefits are severely and systematically biased: 75 percent of our respondents underestimate college returns (defined as average earnings of a college graduate relative to a non-college worker in the population), while 61 percent report net public college costs that exceed actual net costs. There is also substantial heterogeneity in beliefs, with evidence of larger biases among lower-income and non-college households. We also elicit respondents' intended likelihood of their pre-college age child attending college, and the likelihood of them recommending college for a friend's child, the two main behavioral outcomes of interest. Respondents are then randomly exposed to one of two information treatments, which respectively provide objective information about "college returns" and "college costs". We find a significant impact on intended college attendance for individuals in the returns experiment: intended college attendance expectations increase by about 0.2 of the standard deviation in the baseline likelihood. Importantly, as a result of the college returns information intervention, gaps in intended college attendance by household income or parents' education persist but decline by 20-30 percent. Notably, the effect of information persists in the medium-term, two months after the intervention. We, however, find no impact of the cost information treatment on college attendance expectations.
Subjects: 
college enrollment
college returns and costs
information
subjective expectations
JEL: 
D81
D83
D84
I21
I24
I28
Document Type: 
Working Paper

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