Stepping stone and option value in a model of postsecondary education

Nicholas Trachter

A stepping stone arises in risky environments with learning and transferrable human capital. An example is the role played by academic two-year colleges in post-secondary education: Students, as they learn about the uncertain educational outcomes, can drop out or transfer up to harder and more rewarding schools, carrying a fraction of the accumulated human capital. A theory of education is built and contrasted empirically to find that (i) option value explains a large part of returns to enrollment, (ii) enrollment in academic two-year colleges is driven by the option to transfer up, and (iii) the value of the stepping stone is small.

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Year of publication:	March 2015
Authors:	Trachter, Nicholas
Published in:	Quantitative economics : QE ; journal of the Econometric Society. - Oxford [u.a.] : Wiley, ISSN 1759-7331, ZDB-ID 2569569-1. - Vol. 6.2015, 1, p. 223-256
Subject:	Stepping stone \| investment under uncertainty \| academic learning \| postsecondary education \| college education \| returns to education \| Bildungsertrag \| Returns to education \| Hochschule \| Higher education institution \| Schätzung \| Estimation \| Bildungsverhalten \| Educational behaviour \| Bildungsökonomik \| Economics of education \| Bildungsinvestition \| Human capital investment