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The Effect of Credit Constraints on the College Drop-Out Decision A Direct Approach Using a New Panel Study

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  • Todd R. Stinebrickner
  • Ralph Stinebrickner

Abstract

A serious difficulty in determining the importance of credit constraints in education arises because standard data sources do not provide a direct way of identifying which students are credit constrained. This has forced researchers to adopt a variety of indirect approaches. This paper differentiates itself from previous work by taking a direct approach for providing evidence about this issue which is made possible by unique longitudinal data that have been collected specifically for this type of purpose. Our results suggest that, while credit constraints likely play an important role in the drop-out decisions of some students, the large majority of attrition of students from low income families should be primarily attributed to reasons other than credit constraints.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13340.

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Date of creation: Aug 2007
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:13340

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  1. Ralph Stinebrickner & Todd R. Stinebrickner, 2003. "Understanding Educational Outcomes of Students from Low-Income Families: Evidence from a Liberal Arts College with a Full Tuition Subsidy Program," Journal of Human Resources, University of Wisconsin Press, vol. 38(3).
  2. Diego Restuccia & Carlos Urrutia, 2002. "Intergenerational Persistence of Earnings: The Role of Early and College Education," University of Western Ontario, Economic Policy Research Institute Working Papers, University of Western Ontario, Economic Policy Research Institute 20024, University of Western Ontario, Economic Policy Research Institute.
  3. Todd Stinebrickner & Ralph Stinebrickner, 2001. "Working During School and Academic Performance," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers, University of Western Ontario, CIBC Centre for Human Capital and Productivity 20011, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  4. J. Dominitz & C. F. Manski, . "Using expectations data to study subjective income expectations," Institute for Research on Poverty Discussion Papers, University of Wisconsin Institute for Research on Poverty 1050-94, University of Wisconsin Institute for Research on Poverty.
  5. Joseph G. Altonji, 1991. "The Demand for and Return to Education When Education Outcomes are Uncertain," NBER Working Papers 3714, National Bureau of Economic Research, Inc.
  6. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
  7. Jeff Dominitz & Charles F. Manski, 1996. "Eliciting Student Expectations of the Returns to Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 1-26.
  8. Thomas J. Kane, 1996. "College Cost, Borrowing Constraints and the Timing of College Entry," Eastern Economic Journal, Eastern Economic Association, vol. 22(2), pages 181-194, Spring.
  9. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2005. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(1), pages 151-184, February.
  10. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(3), pages 455-499, June.
  11. Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
  12. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  13. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  14. 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.
  15. Manski, Charles F., 1989. "Schooling as experimentation: a reappraisal of the postsecondary dropout phenomenon," Economics of Education Review, Elsevier, Elsevier, vol. 8(4), pages 305-312, August.
  16. Thomas Crossley & Hamish Low, 2004. "When Might Unemployment Insurance Matter?," Department of Economics Working Papers 2004-04, McMaster University.
  17. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August.
  18. 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, University of Chicago Press, vol. 106(2), pages 262-333, April.
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