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arXiv · 2205.05444

Sequential Choices, Option Values, and the Returns to Education

Manudeep Bhuller·Philipp Eisenhauer·Moritz Mendel
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Abstract

Using detailed Norwegian data on earnings, education and work histories, we estimate a dynamic structural model of education and sector choices that captures rich life-cycle patterns by ability. We validate the model against variation in education choices induced by a compulsory schooling reform. Our approach allows us to estimate the ex-ante returns to different education tracks across the life-cycle by individual ability and quantify the contribution of option values. We find substantial heterogeneity in returns and establish crucial roles for option values and re-enrollment in determining education choices and the impact of schooling policies.

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Manudeep Bhuller, Philipp Eisenhauer, Moritz Mendel. 2022-05-11. Sequential Choices, Option Values, and the Returns to Education. https://arxiv.org/abs/2205.05444

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