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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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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 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 from the Berea Panel Study. The results from our study of Berea College students 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 University of Western Ontario, CIBC Centre for Human Capital and Productivity in its series University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers with number 20071.

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Date of creation: 2007
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Handle: RePEc:uwo:hcuwoc:20071

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Postal: CIBC Centre for Human Capital and Productivity, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/cibc_workingpapers.html

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  1. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 48-83, January.
  2. Diego Restuccia & Carlos Urrutia, 2004. "Intergenerational Persistence of Earnings: The Role of Early and College Education," American Economic Review, American Economic Association, vol. 94(5), pages 1354-1378, December.
  3. 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.
  4. Ralph Stinebrickner & Todd R. Stinebrickner, 2003. "Working during School and Academic Performance," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 449-472, April.
  5. Thomas Crossley & Hamish Low, 2004. "When Might Unemployment Insurance Matter?," Department of Economics Working Papers 2004-04, McMaster University.
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  7. Jeff Dominitz & Charles F. Manski, 1994. "Eliciting Student Expectations of the Returns to Schooling," NBER Working Papers 4936, National Bureau of Economic Research, Inc.
  8. 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).
  9. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-48, September.
  10. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
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  12. 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, vol. 42(4), pages 1051-1103, November.
  13. 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.
  14. Manski, Charles F., 1989. "Schooling as experimentation: a reappraisal of the postsecondary dropout phenomenon," Economics of Education Review, Elsevier, vol. 8(4), pages 305-312, August.
  15. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
  16. 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.
  17. 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, vol. 109(3), pages 455-499, June.
  18. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August.
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