Information Heterogeneity and Intended College Enrollment

44 Pages Posted: 9 Aug 2014

See all articles by Zachary Bleemer

Zachary Bleemer

Yale School of Management

Basit Zafar

Arizona State University

Multiple version iconThere are 3 versions of this paper

Date Written: August 1, 2014

Abstract

Despite a robust college premium, college attendance rates in the United States 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. In a nationally representative survey of U.S. household heads, we show that perceptions of college costs and benefits are severely and systematically biased: 74 percent of our respondents underestimate the true benefits of college (average earnings of a college graduate relative to a non-college worker in the population), while 77 percent report public college costs that exceed actual sticker costs. There is substantial heterogeneity in beliefs, with larger biases for the more disadvantaged groups, lower-income and non-college households. We show that these biases are problematic since they (indirectly) impact the respondents’ reported intended likelihood of their (pre-college-age) child attending college. We simulate an “information intervention,” and find that were individuals to be provided with the correct population distribution of college costs and returns, the intended child’s college attendance would increase significantly, by about 0.2 of the standard deviation in the baseline intended likelihood. Importantly, as a result of the simulated intervention, gaps in college attendance by household income or parents’ education persist but decline by 30 to 50 percent.

Keywords: college enrollment, college returns and costs, information, subjective expectations

JEL Classification: D81, D83, D84, I21, I24, I28

Suggested Citation

Bleemer, Zachary and Zafar, Basit, Information Heterogeneity and Intended College Enrollment (August 1, 2014). FRB of New York Staff Report No. 685, Available at SSRN: https://ssrn.com/abstract=2477860 or http://dx.doi.org/10.2139/ssrn.2477860

Zachary Bleemer

Yale School of Management ( email )

165 Whitney Ave
New Haven, CT 06511

HOME PAGE: http://https://zacharybleemer.com

Basit Zafar (Contact Author)

Arizona State University ( email )

WP Carey School of Business, ASU
Tempe, AZ 85287
United States
9179326564 (Phone)

HOME PAGE: http://https://sites.google.com/site/basitakzafar/

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