Suppose that a technological innovation causes the price of capital to decrease and that, in turn, ...

The increase in demand for college graduates drives up the equilibrium wage rate for college graduates.  The drop in demand for high school graduates reduces their equilibrium wage rate.  Other things equal, the higher earnings accruing to college graduates in conjunction with the depressed earnings of high school graduates raises the lifetime earnings differential for investment in a college education.  Under the present value method, the present value of investment in college is increased relative to the cost of the investment and we would expect the college attendance rate to increase as a consequence. Under the internal rate of return method, the increase in the earnings differential raises the internal rate of return on investment in college education.  As a result, the internal rate of return now exceeds the discount rate of proportionally more 18-year olds, meaning that more 18-year olds will find investment in a college education to be financially worthwhile on net and the college attendance rate will increase accordingly.