We examine how informational frictions impact schooling and work outcomes by estimating a dynamic structural model where individuals face uncertainty about their academic ability and productivity, which determine their schooling utility and wages. We account for different college types, majors, occupational search frictions, and work hours. Individuals learn from grades and wages, which may affect their choices. Removing informational frictions would increase graduation by 4.4 percentage points and by an additional 2 points without search frictions. Providing students with full information about their abilities would increase the college and white-collar wage premia while reducing the graduation gap by family income.

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1 January 2025

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Journal of Political Economy 133(1) 2025

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DOI: 10.1086/732526

https://www.journals.uchicago.edu/doi/10.1086/732526

This Journal article is published under the centre's Education programme.