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Peer effects, financial aid and selection of students into colleges and universities: an empirical analysis

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  • Holger Sieg

    (Carnegie Mellon University, Pittsburgh, PA 15213-3890 and NBER, USA)

  • Dennis Epple

    (Carnegie Mellon University, Pittsburgh, PA 15213-3890 and NBER, USA)

  • Richard Romano

    (University of Florida, Florida, USA)

Abstract

This paper develops a model in which colleges seek to maximize the quality of the educational experience provided to their students. We deduce predictions about the hierarchy of schools that emerges in equilibrium, the allocation of students by income and ability among schools, and about the pricing policies that schools adopt. The empirical findings of this paper suggest that there is a hierarchy of school qualities which is characterized by substantial stratification by income and ability. The evidence on pricing by ability is supportive of positive peer effects in educational achievement from high ability at the college level. Copyright © 2003 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 18 (2003)
Issue (Month): 5 ()
Pages: 501-525

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Handle: RePEc:jae:japmet:v:18:y:2003:i:5:p:501-525

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  1. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-86, June.
  2. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  3. Dennis N. Epple & Richard Romano, 2003. "Neighborhood Schools, Choice, and the Distribution of Educational Benefits," NBER Chapters, in: The Economics of School Choice, pages 227-286 National Bureau of Economic Research, Inc.
  4. Gilles, Robert P. & Scotchmer, Suzanne, 1997. "Decentralization in Replicated Club Economies with Multiple Private Goods," Journal of Economic Theory, Elsevier, vol. 72(2), pages 363-387, February.
  5. Thomas J. Nechyba, 2003. "Centralization, Fiscal Federalism, and Private School Attendance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 179-204, February.
  6. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
  7. Manski, Charles F., 1992. "Educational choice (vouchers) and social mobility," Economics of Education Review, Elsevier, vol. 11(4), pages 351-369, December.
  8. Toma, Eugenia Froedge, 1996. "Public Funding and Private Schooling across Countries," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 121-48, April.
  9. Richard Arnott & John Rowse, 1982. "Peer Group Effects and Educational Attainment," Working Papers 497, Queen's University, Department of Economics.
  10. Steven F. Venti & David A. Wise, 1981. "Test Scores, Educational Opportunities, and Individual Choice," NBER Working Papers 0710, National Bureau of Economic Research, Inc.
  11. Caroline M. Hoxby, 2000. "Benevolent Colluders? The Effects of Antitrust Action on College Financial Aid and Tuition," NBER Working Papers 7754, National Bureau of Economic Research, Inc.
  12. Winship C. Fuller & Charles F. Manski & David A. Wise, 1982. "New Evidence on the Economic Determinants of Postsecondary Schooling Choices," Journal of Human Resources, University of Wisconsin Press, vol. 17(4), pages 477-498.
  13. Dennis W. Carlton & Gustavo E. Bamberger & Roy J. Epstein, 1995. "Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid?," NBER Working Papers 4998, National Bureau of Economic Research, Inc.
  14. Elizabeth M. Caucutt, 2002. "Educational Vouchers When There Are Peer Group Effects--Size Matters," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 195-222, February.
  15. Caroline M. Hoxby, 1997. "How the Changing Market Structure of U.S. Higher Education Explains College Tuition," NBER Working Papers 6323, National Bureau of Economic Research, Inc.
  16. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
  17. Bergstrom, Theodore C & Rubinfeld, Daniel L & Shapiro, Perry, 1982. "Micro-Based Estimates of Demand Functions for Local School Expenditures," Econometrica, Econometric Society, vol. 50(5), pages 1183-1205, September.
  18. Caroline Minter Hoxby, 1996. "Are Efficiency and Equity in School Finance Substitutes or Complements?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 51-72, Fall.
  19. repec:fth:prinin:409 is not listed on IDEAS
  20. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  21. Janet S. Netz, 1998. "Non-Profits and Price-Fixing: The Case of the Ivy League," Industrial Organization 9808001, EconWPA.
  22. Fernandez, Raquel & Rogerson, Richard, 1998. "Public Education and Income Distribution: A Dynamic Quantitative Evaluation of Education-Finance Reform," American Economic Review, American Economic Association, vol. 88(4), pages 813-33, September.
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