Abstract

More than one-third of American undergraduate students attend two-year colleges (also called community colleges or junior colleges), but much of the evidence regarding the quality of these schools or the benefits of attending them is anecdotal. This paper describes and estimates a dynamic, discrete-choice model of high school attendance, college attendance, and labor market participation for young white men. Options to attend a two-year college or a four-year college are explicitly permitted, as are several part-time attendance options, and the model allows the college types to differ from each other in a number of dimensions. Data from the NLSY97 and simulated maximum likelihood are used to estimate the parameters of the model. I estimate the market returns to having attended a two-year college to be comparable to the returns to having attended a four-year college. I also propose and simulate several counterfactual policies that target two-year college attendance. In particular, I estimate that an annual tuition subsidy of $1,000 to students who attend a two-year school (pro-rated according to attendance) would substantially increase the number of individuals who earn a two-year degree while decreasing the number who earn four-year degrees.