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Merit aid, student mobility, and the role of college selectivity




In this paper, we investigate the role of college selectivity in mobility decisions (both in-state and out-of-state) of freshmen students following Georgia’s HOPE scholarship program. How did HOPE affect the selectivity of colleges attended by Georgia’s freshmen students? Did it induce Georgia’s freshmen students who would have otherwise attended more selective out-of-state colleges to instead attend less selective in-state ones? Or was there movement to more selective ones, both in-state and out-of-state? Using student residency and enrollment data from IPEDS and selectivity data from Barron’s and Peterson’s, we find that in the aftermath of HOPE, Georgia freshmen attended relatively more selective colleges overall. Disaggregating further, we find that Georgia freshmen attending in-state colleges attended more selective ones. Georgia freshmen attending out-of-state colleges were also more likely to attend more selective colleges, most likely due to an increase in the reservation price to go to out-of-state colleges following HOPE. Our results are robust to a variety of sensitivity checks and have important policy implications. In particular, Peltzman had observed in his classic 1973 paper that in-kind subsidies can induce individuals to invest in less quality-adjusted human capital than they might otherwise. The fact that Georgia freshmen attended relatively more selective colleges in the post-HOPE period allays, to some extent, the concern that state merit aid programs can adversely affect long-term outcomes and human capital formation.

Suggested Citation

  • Chakrabarti, Rajashri & Roy, Joydeep, 2013. "Merit aid, student mobility, and the role of college selectivity," Staff Reports 641, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:641

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    References listed on IDEAS

    1. Dynarski, Susan, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," National Tax Journal, National Tax Association, vol. 53(3), pages 629-662, September.
    2. Sarah R. Cohodes & Joshua S. Goodman, 2014. "Merit Aid, College Quality, and College Completion: Massachusetts' Adams Scholarship as an In-Kind Subsidy," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 251-285, October.
    3. Long, Mark C., 2010. "Changes in the returns to education and college quality," Economics of Education Review, Elsevier, vol. 29(3), pages 338-347, June.
    4. Christopher Avery & Caroline Minter Hoxby, 2004. "Do and Should Financial Aid Packages Affect Students' College Choices?," NBER Chapters,in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 239-302 National Bureau of Economic Research, Inc.
    5. Long, Mark C., 2008. "College quality and early adult outcomes," Economics of Education Review, Elsevier, vol. 27(5), pages 588-602, October.
    6. Goodman, Joshua, 2008. "Who merits financial aid?: Massachusetts' Adams Scholarship," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2121-2131, October.
    7. Griffith, Amanda L. & Rothstein, Donna S., 2009. "Can't get there from here: The decision to apply to a selective college," Economics of Education Review, Elsevier, vol. 28(5), pages 620-628, October.
    8. Maria D. Fitzpatrick & Damon Jones, 2012. "Higher Education, Merit-Based Scholarships and Post-Baccalaureate Migration," NBER Working Papers 18530, National Bureau of Economic Research, Inc.
    9. Caroline M. Hoxby, 2009. "The Changing Selectivity of American Colleges," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 95-118, Fall.
    10. Judith Scott-Clayton, 2011. "On Money and Motivation: A Quasi-Experimental Analysis of Financial Incentives for College Achievement," Journal of Human Resources, University of Wisconsin Press, vol. 46(3), pages 614-646.
    11. Susan Dynarski, 2008. "Building the Stock of College-Educated Labor," Journal of Human Resources, University of Wisconsin Press, vol. 43(3), pages 576-610.
    12. Dan A. Black & Jeffrey A. Smith, 2006. "Estimating the Returns to College Quality with Multiple Proxies for Quality," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 701-728, July.
    13. Christopher M. Cornwell & Kyung Hee Lee & David B. Mustard, 2005. "Student Responses to Merit Scholarship Retention Rules," Journal of Human Resources, University of Wisconsin Press, vol. 40(4), pages 895-917.
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    Cited by:

    1. David L. Sjoquist & John V. Winters, 2016. "The Effects of State Merit Aid Programs on Attendance at Elite Colleges," Southern Economic Journal, Southern Economic Association, vol. 83(2), pages 527-549, October.

    More about this item


    Universities and colleges; Subsidies; Education - Economic aspects; Human capital;

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • I2 - Health, Education, and Welfare - - Education

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