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Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform

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  • Helena Skyt Nielsen
  • Torben S�rensen
  • Christopher Taber

Abstract

In this paper, we estimate the response of college enrollment to changes in student aid arising from a Danish reform. We separately identify the effect of aid from that of other observed and unobserved variables such as parental income. We exploit the combination of a kinked aid scheme and a reform to identify the effect of direct costs on enrollment. To allow for potential biases due to borrowing constraints, we use detailed information on parents' assets. We find that enrollment is less responsive than found in other studies and that borrowing constraints only deter college enrollment to a minor extent. (JEL H52, I22, I23)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.2.2.185
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File URL: http://www.aeaweb.org/aej/pol/data/2008-0150_data.zip
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 2 (2010)
Issue (Month): 2 (May)
Pages: 185-215

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Handle: RePEc:aea:aejpol:v:2:y:2010:i:2:p:185-215

Note: DOI: 10.1257/pol.2.2.185
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References

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  1. Neil S. Seftor & NSarah E. Turner, 2002. "Back to School: Federal Student Aid Policy and Adult College Enrollment," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 336-352.
  2. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-46, April.
  3. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
  4. Carneiro, Pedro & Heckman, James J., 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," IZA Discussion Papers 518, Institute for the Study of Labor (IZA).
  5. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  6. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "General Equilibrium Treatment Effects: A Study of Tuition Policy," NBER Working Papers 6426, National Bureau of Economic Research, Inc.
  7. Philippe Belley & Lance Lochner, 2007. "The Changing Role of Family Income and Ability in Determining Educational Achievement," NBER Working Papers 13527, National Bureau of Economic Research, Inc.
  8. Richard Blundell & Alan Duncan & Costas Meghir, 1998. "Estimating Labor Supply Responses Using Tax Reforms," Econometrica, Econometric Society, vol. 66(4), pages 827-862, July.
  9. John Shea, 1997. "Does Parents' Money Matter?," NBER Working Papers 6026, National Bureau of Economic Research, Inc.
  10. Meta Brown & John Karl Scholz & Ananth Seshadri, 2009. "A New Test of Borrowing Constraints for Education," NBER Working Papers 14879, National Bureau of Economic Research, Inc.
  11. Philip Oreopoulos & Daniel Lang & Joshua Angrist, 2009. "Incentives and Services for College Achievement: Evidence from a Randomized Trial," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 136-63, January.
  12. Becker, Gary S & Tomes, Nigel, 1986. "Human Capital and the Rise and Fall of Families," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages S1-39, July.
  13. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
  14. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
  15. Ralph Stinebrickner & Todd Stinebrickner, 2008. "The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using a New Panel Study," American Economic Review, American Economic Association, vol. 98(5), pages 2163-84, December.
  16. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1), pages 149-163.
  17. McPherson, Michael S & Schapiro, Morton Owen, 1991. "Does Student Aid Affect College Enrollment? New Evidence on a Persistent Controversy," American Economic Review, American Economic Association, vol. 81(1), pages 309-18, March.
  18. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Maria Knoth Humlum & Rune Majlund Vejlin, 2009. "The Effects of Financial Aid in High School on Academic and Labor Market Outcomes: A Quasi-Experimental Study," Economics Working Papers 2009-02, School of Economics and Management, University of Aarhus.
  2. Bednar, Steven & Gicheva, Dora, 2013. "Tax benefits for graduate education: Incentives for whom?," Economics of Education Review, Elsevier, vol. 36(C), pages 181-197.
  3. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1), pages 149-163.
  4. Simonsen, Marianne & Skipper, Lars & Skipper, Niels, 2010. "Price Sensitivity of Demand for Prescription Drugs: Exploiting a Regression Kink Design," Working Papers 10-1, University of Aarhus, Aarhus School of Business, Department of Economics.
  5. Turner, Nicholas, 2010. "The Effect of Tax-Based Federal Student Aid on College Enrollment," University of California at San Diego, Economics Working Paper Series qt6758069g, Department of Economics, UC San Diego.
  6. Trude Gunnes & Lars J. Kirkebøen & Marte Rønning, 2012. "Financial incentives and study duration in higher education," Discussion Papers 714, Research Department of Statistics Norway.
  7. Ando, Michihito, 2013. "How Much Should We Trust Regression-Kink-Design Estimates?," Working Paper Series 2013:22, Uppsala University, Department of Economics.
  8. Jacob Arendt, 2013. "The effect of public financial aid on dropout from and completion of university education: evidence from a student grant reform," Empirical Economics, Springer, vol. 44(3), pages 1545-1562, June.
  9. Dong, Yingying, 2010. "Jumpy or Kinky? Regression Discontinuity without the Discontinuity," MPRA Paper 25461, University Library of Munich, Germany.
  10. Tommaso Agasisti & Samuele Murtinu, 2013. "Are we wasting public money? No! The effects of grants on Italian university students’ performances," Working Papers 2013/33, Institut d'Economia de Barcelona (IEB).
  11. Frenette, Marc, 2011. "Is Debt Relief as Good as Liquidity? The Impact of Prospective Student Debt on Post-Secondary Attendance among Low-Income Youth," CLSSRN working papers clsrn_admin-2011-7, Vancouver School of Economics, revised 29 Mar 2011.
  12. Avdic, Daniel & Gartell, Marie, 2011. "The study pace among college students before and after a student aid reform: some Swedish results," Working Paper Series, Center for Labor Studies 2011:15, Uppsala University, Department of Economics.
  13. Steiner, Viktor & Wrohlich, Katharina, 2008. "Financial Student Aid and Enrollment into Higher Education: New Evidence from Germany," IZA Discussion Papers 3601, Institute for the Study of Labor (IZA).
  14. Loris Vergolini & Nadir Zanini, 2012. "How does aid matter? The effect of financial aid on university enrolment decisions," Working Papers 2012/7, Institut d'Economia de Barcelona (IEB).
  15. Avdic, Daniel & Gartell, Marie, 2011. "The study pace among college students before and after a student aid reform: some Swedish results," Arbetsrapport 2011:7, Institute for Futures Studies.

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