The persistent high wage premium associated with college education, despite increasing participation rates, continues to generate a great deal of academic and policy interest. While it is widely agreed that the financial benefits associated with college completion outweigh the costs, modeling and empirically estimating the returns are complicated. A simple theoretical framework on educational investment illustrates the decision-making processes and key factors, such as expected returns, that guide the choice of an individual to engage in higher education and to achieve an optimal level of educational investment. Broadening the investment model, however, is instrumental to account for potential heterogeneous returns to higher education - the variation in returns by institution, field of study, and students? background characteristics, among others - and to recognize the wider societal benefits of higher education, beyond private returns.

---

17 April 2024

---

Oxford Research Encyclopedia of Economics and Finance 2024

---

DOI: 10.1093/acrefore/9780190625979.013.660

https://oxfordre.com/economics/display/10.1093/acrefore/9780190625979.001.0001/acrefore-9780190625979-e-660

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