The Effects of College Cost and Financial AID in Germany

<i>Human Capital</i> is Becker's classic study of how investment in an individual's education and training is similar to business investments in equipment. Recipient of the 1992 Nobel Prize in Economic Science, Gary S. Becker is a pioneer of applying economic analysis to human behavior in such areas as discrimination, marriage, family relations, and education. Becker's research on human capital was considered by the Nobel committee to be his most noteworthy contribution to economics.<br> <br> This expanded edition includes four new chapters, covering recent ideas about human capital, fertility and economic growth, the division of labor, economic considerations within the family, and inequality in earnings.<br> <br> "Critics have charged that Mr. Becker's style of thinking reduces humans to economic entities. Nothing could be further from the truth. Mr. Becker gives people credit for having the power to reason and seek out their own best destiny."—<i>Wall Street Journal</i> Show more

We consider how the economic return to a college education varies across members of the U.S. population. Based on principles of comparative advantage, positive selection is commonly presumed, i.e., individuals who are most likely to select into college benefit most from college. Net of observed economic and non-economic factors influencing college attendance, we conjecture that individuals who are least likely to obtain a college education benefit most from college. We call this theory the negative selection hypothesis. To adjudicate between the two hypotheses, we study the effects of completing college on earnings by propensity score strata using an innovative hierarchical linear model with data from the National Longitudinal Survey of Youth 1979 and the Wisconsin Longitudinal Study. For both data sources, for men and for women, and for every observed stage of the life course, we find evidence suggesting negative selection. Results from auxiliary analyses lend further support to the negative selection interpretation of the results. Show more