Education and Self-Selection
A structural model of the demand for college attendance is derived as a selection problem in the theory of comparative advantage, in which individuals are endowed with different kinds of talents. Some talents and abilities are more valuable in the types of work associated with college education and others are more valuable for work associated with high school education. For example, mechanical abilities are less important for lawyers than for plumbers, whereas verbal abilities are much more valuable for lawyers. The market tends to sort people into work activities for which they have a comparative advantage, as indexed by expected earnings in each activity. The structural model also allows for the influence of parental background in the selection process.