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

  • Ralph Stinebrickner
  • Todd Stinebrickner

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, 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. (JEL I21, I22)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 5 (December)
Pages: 2163-84

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Handle: RePEc:aea:aecrev:v:98:y:2008:i:5:p:2163-84
Note: DOI: 10.1257/aer.98.5.2163
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  1. 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.
  2. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
  3. Jeff Dominitz & Charles F. Manski, 1994. "Eliciting Student Expectations Of The Returns To Schooling," Econometrics 9411002, EconWPA.
  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. Heckman, James J & Lochner, Lance & Taber, Christopher, 1998. "General-Equilibrium Treatment Effects: A Study of Tuition Policy," American Economic Review, American Economic Association, vol. 88(2), pages 381-86, May.
  6. 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.
  7. 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.
  8. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-48, September.
  9. David Card, 1994. "Earnings, Schooling, and Ability Revisited," NBER Working Papers 4832, National Bureau of Economic Research, Inc.
  10. 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.
  11. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2000. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," NBER Working Papers 7831, National Bureau of Economic Research, Inc.
  12. 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).
  13. 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.
  14. 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.
  15. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
  16. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August.
  17. Thomas Crossley & Hamish Low, 2004. "When Might Unemployment Insurance Matter?," Department of Economics Working Papers 2004-04, McMaster University.
  18. 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.
  19. 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.
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