Question

Suppose you hear that the college wage premium has declined over the past 15 years in Russia but the share of the population getting a college degree has actually continued to rise during this period. Why might it be that more people are getting a degree even when the relative wage gain is shrinking in this setting? Provide economic intuition

Answer 1

Even though the college wage premium has declined for the students in Russia over the past 15 years. But the number of people going to College in Russia has not declined because the college wage premium might have declined less than the wages of non-college wages premium.

For example, if a student after graduating from college is getting a lesser earning form his new job will join a college because the wages he will get if he is not graduated from the college will be significantly lower.

Second, the chances of getting a good job and a healthy wage will increase if the person has graduated from the college. So, this increased probability of getting a better job will encourage him to spend more on his college tuitions.