January 1998

The Effects of Two-Year College on the Labor Market and Schooling Experiences of Young Men

Brian J. Surette


In 1994, nearly 40 percent of all college students attended two-year colleges. This study uses 12 years of data for young men from the NLSY to examine (1) the labor market returns to two-year college, (2) whether attendance at a two-year college helps students to transfer to four-year college, and (3) whether reducing the cost of college would alter attendance by enough to affect wages or income. I find that the returns to two-year college credits are large and positive (on the order of 7 to 10 percent), and that a student does not need to complete an associate’s degree to enjoy these benefits. Degree completion further raises wages and income. Examining the transfer role of two-year colleges, I find that one year of two-year credits has the same effect on subsequent four-year college attendance as one year of four-year credits, suggesting that the transfer role is quite important. Finally, reducing tuition is shown to raise attendance by enough to raise average wages and earnings modestly. These results are based on a Full Information Maximum Likelihood framework in which discrete factor random effects address the potential bias introduced by unobserved heterogeneity.

Keywords: Two-year college, four-year college, community college, training, returns to schooling

PDF: Full Paper

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