IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v25y2013icp1-11.html
   My bibliography  Save this article

Financial incentives and study duration in higher education

Author

Listed:
  • Gunnes, Trude
  • Kirkebøen, Lars J.
  • Rønning, Marte

Abstract

This paper investigates to what extent students in higher education respond to financial incentives by adjusting their study behavior. Students in Norway who completed certain graduate study programs between autumn 1990 and 1995 on stipulated time were entitled to a restitution of approximately 3000USD from the Norwegian State Educational Loan Fund. Comparing treated and untreated (control) programs in a difference-in-differences framework, we find that the average delay in the treatment group decreased by 0.8 semester during the reform period, and by 1.5 semesters in the following two years. Number of years treated matters strongly, with delays reduced by 0.23 semesters per year treated. Furthermore, there is some indication that it is important that treatment starts before the final part of the educational programs. The share of on-time graduation increases by 3.8 percentage points per year treated, from a pre-reform level of about 20%. Thus, a large share of the restitutions given will be for students who would otherwise not have graduated on time. A series of robustness checks indicate that our estimated effects do not reflect differential trends or omitted variables.

Suggested Citation

  • Gunnes, Trude & Kirkebøen, Lars J. & Rønning, Marte, 2013. "Financial incentives and study duration in higher education," Labour Economics, Elsevier, vol. 25(C), pages 1-11.
  • Handle: RePEc:eee:labeco:v:25:y:2013:i:c:p:1-11
    DOI: 10.1016/j.labeco.2013.04.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927537113000523
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.labeco.2013.04.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hans J. Baumgartner & Viktor Steiner, 2005. "Student Aid, Repayment Obligations and Enrolment in Higher Education in Germany – Evidence from a “Natural Experiment”," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(1), pages 29-38.
    2. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 1999. "Social Norms and Economic Incentives in the Welfare State," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 1-35.
    3. Edwin Leuven & Hessel Oosterbeek & Bas van der Klaauw, 2010. "The Effect of Financial Rewards on Students' Achievement: Evidence from a Randomized Experiment," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1243-1265, December.
    4. John Bound & Sarah Turner, 2007. "Understanding the Increased Time to the Baccalaureate Degree," Discussion Papers 06-043, Stanford Institute for Economic Policy Research.
    5. Helena Skyt Nielsen & Torben Sørensen & Christopher Taber, 2010. "Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform," NBER Chapters, in: Income Taxation, Trans-Atlantic Public Economics Seminar (TAPES), pages 185-215, National Bureau of Economic Research, Inc.
    6. Basit Zafar, 2013. "College Major Choice and the Gender Gap," Journal of Human Resources, University of Wisconsin Press, vol. 48(3), pages 545-595.
    7. Pietro Garibaldi & Francesco Giavazzi & Andrea Ichino & Enrico Rettore, 2012. "College Cost and Time to Complete a Degree: Evidence from Tuition Discontinuities," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 699-711, August.
    8. Brunello, Giorgio & Winter-Ebmer, Rudolf, 2003. "Why do students expect to stay longer in college? Evidence from Europe," Economics Letters, Elsevier, vol. 80(2), pages 247-253, August.
    9. Jacob Arendt, 2013. "The effect of public financial aid on dropout from and completion of university education: evidence from a student grant reform," Empirical Economics, Springer, vol. 44(3), pages 1545-1562, June.
    10. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    11. Maria Knoth Humlum & Rune Majlund Vejlin, 2013. "The Responses Of Youth To A Cash Transfer Conditional On Schooling: A Quasi‐Experimental Study," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 628-649, June.
    12. Booij, Adam S. & Leuven, Edwin & Oosterbeek, Hessel, 2012. "The role of information in the take-up of student loans," Economics of Education Review, Elsevier, vol. 31(1), pages 33-44.
    13. Häkkinen, Iida & Uusitalo, Roope, 2003. "The Effect of a Student Aid Reform on Graduation: A Duration Analysis," Working Paper Series 2003:8, Uppsala University, Department of Economics.
    14. Kifmann Mathias & Heineck Martin & Lorenz Normann, 2006. "A Duration Analysis of the Effects of Tuition Fees for Long-Term Students in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(1), pages 82-109, February.
    15. Susan M. Dynarski, 2003. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," American Economic Review, American Economic Association, vol. 93(1), pages 279-288, March.
    16. Susan Dynarski, 2004. "The New Merit Aid," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 63-100, National Bureau of Economic Research, Inc.
    17. Ruhm, Christopher J, 1997. "Is High School Employment Consumption or Investment?," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 735-776, October.
    18. Juanna Schrøter Joensen, 2010. "Timing and Incentives: Impacts of Student Aid on Academic Achievement," 2010 Meeting Papers 823, Society for Economic Dynamics.
    19. Annette Alstadsæter & Hans Henrik Sievertsen, 2009. "The Consumption Value of Higher Education," CESifo Working Paper Series 2871, CESifo.
    20. Light, Audrey, 2001. "In-School Work Experience and the Returns to Schooling," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 65-93, January.
    21. Gary-Bobo, Robert J. & Brodaty, Thomas & Prieto, Ana, 2008. "Does Speed Signal Ability? The Impact of Grade Repetitions on Employment and Wages," CEPR Discussion Papers 6832, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aina, Carmen & Baici, Eliana & Casalone, Giorgia & Pastore, Francesco, 2019. "Delayed Graduation and University Dropout: A Review of Theoretical Approaches," IZA Discussion Papers 12601, Institute of Labor Economics (IZA).
    2. Mikola, Derek & Webb, Matthew D., 2023. "Finish it and it is free: An evaluation of college graduation subsidies," Economics of Education Review, Elsevier, vol. 93(C).
    3. Cockx, B. & Declercq, Koen & Dejemeppe, Muriel, 2022. "Losing prospective entitlement to unemployment benefits. Impact on educational attainment," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    4. Hämäläinen, Ulla & Koerselman, Kristian & Uusitalo, Roope, 2017. "Graduation Incentives Through Conditional Student Loan Forgiveness," IZA Discussion Papers 11142, Institute of Labor Economics (IZA).
    5. Chadi, Adrian & de Pinto, Marco & Schultze, Gabriel, 2019. "Young, gifted and lazy? The role of ability and labor market prospects in student effort decisions," Economics of Education Review, Elsevier, vol. 72(C), pages 66-79.
    6. Declercq, Koen & Verboven, Frank, 2018. "Enrollment and degree completion in higher education without admission standards," Economics of Education Review, Elsevier, vol. 66(C), pages 223-244.
    7. Matsuda, Kazushige & Mazur, Karol, 2022. "College education and income contingent loans in equilibrium," Journal of Monetary Economics, Elsevier, vol. 132(C), pages 100-117.
    8. Kelly Foley & Fane Groes, 2021. "Admissions Constraints and the Decision to Delay University," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(2), pages 478-507, April.
    9. Silva, Polyana Tenório de Freitas e & Sampaio, Luciano Menezes Bezerra, 2023. "Does student aid make a degree more likely? Evidence of the permanence scholarship program from survival models," International Journal of Educational Development, Elsevier, vol. 96(C).
    10. Susanna Sten-Gahmberg, 2020. "Student Heterogeneity and Financial Incentives in Graduate Education: Evidence from a Student Aid Reform," Education Finance and Policy, MIT Press, vol. 15(3), pages 543-580, Summer.
    11. Aina, Carmen & Baici, Eliana & Casalone, Giorgia & Pastore, Francesco, 2018. "The economics of university dropouts and delayed graduation: a survey," GLO Discussion Paper Series 189, Global Labor Organization (GLO).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pietro Garibaldi & Francesco Giavazzi & Andrea Ichino & Enrico Rettore, 2012. "College Cost and Time to Complete a Degree: Evidence from Tuition Discontinuities," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 699-711, August.
    2. Avdic, Daniel & Gartell, Marie, 2015. "Working while studying? Student aid design and socioeconomic achievement disparities in higher education," Labour Economics, Elsevier, vol. 33(C), pages 26-40.
    3. Jacob Arendt, 2013. "The effect of public financial aid on dropout from and completion of university education: evidence from a student grant reform," Empirical Economics, Springer, vol. 44(3), pages 1545-1562, June.
    4. Susanna Sten-Gahmberg, 2020. "Student Heterogeneity and Financial Incentives in Graduate Education: Evidence from a Student Aid Reform," Education Finance and Policy, MIT Press, vol. 15(3), pages 543-580, Summer.
    5. Hämäläinen, Ulla & Koerselman, Kristian & Uusitalo, Roope, 2017. "Graduation Incentives Through Conditional Student Loan Forgiveness," IZA Discussion Papers 11142, Institute of Labor Economics (IZA).
    6. Elena Mattana & Juanna Joensen, 2016. "Student Aid, Academic Achievement, and Labor Market Behavior," 2016 Meeting Papers 1102, Society for Economic Dynamics.
    7. Juanna Schrøter Joensen, 2010. "Timing and Incentives: Impacts of Student Aid on Academic Achievement," 2010 Meeting Papers 823, Society for Economic Dynamics.
    8. Elena Mattana & Juanna Joensen, 2014. "Student Aid, Academic Achievement, and Labor Market Behavior: Grants or Loans?," 2014 Meeting Papers 707, Society for Economic Dynamics.
    9. Agar Brugiavini & Carlo Carraro & Matija Kovacic, 2014. "Academic Achievements: Grades versus Duration," Working Papers 2014:13, Department of Economics, University of Venice "Ca' Foscari".
    10. Jason M. Lindo & Nicholas J. Sanders & Philip Oreopoulos, 2010. "Ability, Gender, and Performance Standards: Evidence from Academic Probation," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 95-117, April.
    11. Declercq, Koen & Verboven, Frank, 2018. "Enrollment and degree completion in higher education without admission standards," Economics of Education Review, Elsevier, vol. 66(C), pages 223-244.
    12. Aina, Carmen & Baici, Eliana & Casalone, Giorgia & Pastore, Francesco, 2018. "The Economics of University Dropouts and Delayed Graduation: A Survey," IZA Discussion Papers 11421, Institute of Labor Economics (IZA).
    13. Carmen Aina & Francesco Pastore, 2020. "Delayed Graduation and Overeducation in Italy: A Test of the Human Capital Model Versus the Screening Hypothesis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 152(2), pages 533-553, November.
    14. Joshua Angrist & Philip Oreopoulos & Tyler Williams, 2014. "When Opportunity Knocks, Who Answers?: New Evidence on College Achievement Awards," Journal of Human Resources, University of Wisconsin Press, vol. 49(3), pages 572-610.
    15. Avdic, Daniel & Gartell, Marie, 2011. "The study pace among college students before and after a student aid reform: some Swedish results," Working Paper Series, Center for Labor Studies 2011:15, Uppsala University, Department of Economics.
    16. Carmen Aina, 2011. "The Determinants of Success and Failure of Italian University Students. Evidence from administrative data," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 119(2), pages 85-108.
    17. Carmen Aina & Eliana Baici & Giorgia Casalone, 2010. "Time-to-Degree: Students' Abilities, University Characteristics or What Else? Evidence from Italy," Working Papers 130, SEMEQ Department - Faculty of Economics - University of Eastern Piedmont.
    18. Silva, Polyana Tenório de Freitas e & Sampaio, Luciano Menezes Bezerra, 2023. "Does student aid make a degree more likely? Evidence of the permanence scholarship program from survival models," International Journal of Educational Development, Elsevier, vol. 96(C).
    19. Richard Murphy & Gill Wyness, 2023. "Testing Means-Tested Aid," Journal of Labor Economics, University of Chicago Press, vol. 41(3), pages 687-727.
    20. Vergolini, Loris & Zanini, Nadir, 2015. "Away, but not too far from home. The effects of financial aid on university enrolment decisions," Economics of Education Review, Elsevier, vol. 49(C), pages 91-109.

    More about this item

    Keywords

    Financial incentives; Higher education; On-time graduation; Semesters delayed; Difference-in-difference;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:25:y:2013:i:c:p:1-11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/labeco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.