UCL Department of Economics


Job Market Paper

To Go to College or Not? The Role of Ability, Family Background and Risk


What are the main factors determining whether one goes to college or not? How important is risk, family background, cognitive and non-cognitive ability? This paper uses a structural life cycle model to address these questions. The model explicitly captures the decision to go to college and incorporates important features which impact the returns to college such as savings, labour supply, human capital accumulation and depreciation, wage risk and employment risk. The model is estimated using rich UK cohort data containing early measures of both cognitive and non-cognitive ability, in addition to rich family background information. It is estimated that grants, parental background, non-cognitive ability and risk significantly impact the decision to go to college. However, the biggest factor in determining college attendance is cognitive ability; if high school graduates had the same cognitive ability distribution as college graduates then college attendance would increase by roughly 20%. This is driven both by differences in returns to college conditional on ability and by the larger psychic costs faced by those with low ability. This suggests that policies aimed at increasing the cognitive ability of individuals at early ages are key to increasing college attendance.