Earnings Expectations and Educational Sorting: An Ex‐Ante Perspective on Returns to University Education

We estimate ex‐ante treatment effects in earnings for attending university using survey data of the expectations of Stockholm high school students under different educational counterfactuals. Although the levels of earnings expectations are reasonable, they differ between stated and revealed educational preferences. The average ex‐ante return is estimated to be 45%, with higher returns for female, high SES, and high math score students. The return is positive even for those who choose high school, unless they discount their future earnings streams by at least 4%–6%. We also find that students sort into education based on their perceived comparative advantage.