  Using detailed Norwegian data on earnings, education and work histories, we
estimate a dynamic structural model of education and sector choices that
captures rich life-cycle patterns by ability. We validate the model against
variation in education choices induced by a compulsory schooling reform. Our
approach allows us to estimate the ex-ante returns to different education
tracks across the life-cycle by individual ability and quantify the
contribution of option values. We find substantial heterogeneity in returns and
establish crucial roles for option values and re-enrollment in determining
education choices and the impact of schooling policies.
