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Merit-Based College Scholarships and Car Sales


  • Christopher Cornwell

    () (Department of Economics, Terry College of Business, University of Georgia)

  • David B. Mustard

    (Department of Economics, Terry College of Business, University of Georgia)


Since the early 1990s, state governments have distributed billions of dollars in financial aid through merit-based college scholarships, most of which have no means tests. The model for most of these programs is Georgia's Helping Outstanding Pupils Educationally (HOPE) scholarship. Given the high correlation between precollege academic achievement and family income, the program characteristics raise the question: to what extent are HOPE disbursements simply rent payments to households otherwise inclined to send their children to college? This article addresses the rent question by examining the effect of HOPE on automobile consumption. The relatively swift passage of the lottery law and establishment of the program created an unanticipated windfall large enough to encourage the financing of consumer durables purchases, such as automobiles, out of household savings targeted for college. First, we compare car registrations in Georgia with those in sets of control group states before and after HOPE. We do not find a statistically significant overall HOPE effect, but allowing the HOPE coefficient to vary by year reveals statistically significant percentage increases in registered vehicles in 1994 and 1995, when the program's income cap was raised and then removed. Next, we examine the relationship between car registrations and HOPE recipients by county. Our results indicate that the number of HOPE recipients attending degree-granting institutions increases car registrations in counties above the 75th percentile in per capita income; there is no evidence of a relationship in counties below the 25th per capita income percentile. © 2007 American Education Finance Association

Suggested Citation

  • Christopher Cornwell & David B. Mustard, 2007. "Merit-Based College Scholarships and Car Sales," Education Finance and Policy, MIT Press, vol. 2(2), pages 133-151, February.
  • Handle: RePEc:tpr:edfpol:v:2:y:2007:i:2:p:133-151

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    Cited by:

    1. Benjamin W. Cowan & Dustin R. White, 2014. "The Effects of Merit-Based Financial Aid on Drinking in College," Carlo Alberto Notebooks 346, Collegio Carlo Alberto.
    2. David L. Sjoquist & John V. Winters, 2015. "State Merit-Based Financial Aid Programs And College Attainment," Journal of Regional Science, Wiley Blackwell, vol. 55(3), pages 364-390, June.
    3. 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.
    4. 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.
    5. Cornwell, Christopher & Lee, Kyung Hee & Mustard, David B., 2003. "The Effects of Merit-Based Financial Aid on Course Enrollment, Withdrawal and Completion in College," IZA Discussion Papers 820, Institute for the Study of Labor (IZA).
    6. Christopher M. Cornwell & Kyung Hee Lee & David B. Mustard, 2005. "Student Responses to Merit Retention Rules," HEW 0501001, EconWPA.
    7. Cowan, Benjamin W. & White, Dustin R., 2015. "The effects of merit-based financial aid on drinking in college," Journal of Health Economics, Elsevier, vol. 44(C), pages 137-149.

    More about this item


    merit-based scholarships; college scholarships; car sales; Helping Outstanding Pupils Educationally (HOPE); Georgia;

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid


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