Question

Indicate the implications of each of the following for estimates on the rate of return on a college education, and the implications for public policy:

1. The screening hypothesis
2. That part of college is consumption not investment
3. The fact that those who go to college are more able to financially than those who do not
4. That jobs for college graduates generally have better benefits

Answer 1

Screening is done in college education in order to asses aptitude and skills necessary to take college education.Therefore it is a positive factor in the return on investment in college education.

The possibility that a portion of one's expenditure in college should be considered as consumption as opposed to investment has negative impact on return to investment which means the money is not expected to be returned.The cost of college education is a financial investment and can also be considered as a social investment in terms of networking opportunities.

The fact that people who go to college are generally more able than those who do not has a positive impact on return on investment . It is a positive signal for employers of the intellectual ability of the candidate.The employers understand that the candidate has the ability to complete his task .

The fact that college graduates generally have better benefits than school graduates provides a positive investment return.Jobs can have health insurance and also gives the person to develop networking with other colleagues.