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Risk Premiums and Schooling Choice,
RAND CORP SANTA MONICA CALIF
Pagination or Media Count:
Uncertainty about the effect of schooling on an individuals welfare can take many forms. The human capital approach assumes that the prospective student projects costs and benefits, calculates an approximate rate of return, and compares this rate with the best alternative. Projection involves estimates of ability, quality of educational services, direct and indirect costs, the demand in each year for acquired skills, trends in prices, and countless other variables. In this paper, non-pecuniary costs and returns will generally be ignored and a particular type of risk will be examined -- one in which an investor estimates the parameters of the distribution of yearly earnings net of direct and indirect investment costs and makes his decisions according to those parameters.
APPROVED FOR PUBLIC RELEASE