The Impact of Cost on the Choice of University: Evidence from Ontario

This paper provides the first Canadian study of the link between cost to the student and the choice of university. Over the past two decades, there has been a substantial increase in the differences among Ontario universities in “net cost” defined as tuition and fees minus the expected value to an academically strong student of a guaranteed merit scholarship. Our estimates generally indicate no relationship between net cost and the overall share of strong applicants that a university is able to attract. An increase in net cost is associated with an increase in the ratio of strong students from high income neighborhoods to strong students from middle income and low income neighborhoods in Arts and Science programs but not in Commerce and Engineering. Finally, more advantaged students are more likely to attend university, but merit aid is not of disproportionate benefit to those from more economically advantaged backgrounds given registration.