Working Paper: NBER ID: w22734
Authors: Russell Cooper
Abstract: This paper studies the determinants of mismatch in educational attainment. Mismatch arises when high ability individuals do not obtain a college degree and/or low ability individuals do. Using data from the NLSY97 survey, the paper estimates a structural model of education choice that matches the moments of mismatch, college attainment and labor market outcomes. The analysis conditions on gender, race and socio-economic status. Ignoring the role of parents, mismatch is explained by differences in tastes for education and the presence of occasionally binding borrowing constraints. But parents matter. This channel operates through both the attitudes and ability of offspring. Once these links between parents and children are taken into account, the influence of borrowing constraints disappears. Mismatch reflects variations in tastes as well as noise in test scores, the underlying measure of ability. The paper also presents a decomposition of the college wage premium into the returns to schooling and the selection into higher education. The analysis highlights the power of selection into higher education as an explanation of the college wage premium by gender, race and socio-economic status.
Keywords: Mismatch; Educational Attainment; Borrowing Constraints; Tastes for Education; College Wage Premium
JEL Codes: E21; E24; I21; I23; I26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| borrowing constraints (F34) | educational undermatch (I24) |
| variations in tastes for education (I24) | undermatch (C78) |
| variations in tastes for education (I24) | overmatch (C52) |
| parental education (I24) | children's educational outcomes (I21) |
| parental income (D31) | children's educational outcomes (I21) |
| parental influences (J12) | educational attainment of children (I21) |
| college wage premium (J31) | returns to schooling (I26) |
| college wage premium (J31) | selection effects (C52) |