This paper studies mismatch in educational attainment. Mismatch arises when high ability individuals do not obtain a college degree and/or low ability individuals do obtain such a degree. 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 both gender and race. The model with occasionally binding borrowing constraint fits the moments better than a model with perfect capital markets, indicating that capital market frictions may contribute to mismatch. The influence of parents on educational attainment is present though this channel appears to operate through attitudes rather than through the provision of resources. Once this link between parents and children is taken into account, the influence of borrowing constraints disappears. In this case, mismatch reflects differences in tastes rather than borrowing constraints. 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 and race.
↧