IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Understanding the Income Gradient in College Attendance in Mexico: The Role of Heterogeneity in Expected Returns

Listed author(s):
  • Katja Maria Kaufmann

Differences in college enrollment rates between poor and rich students are a prevalent phenomenon, but particularly striking in Latin America. The literature suggests explanations such as differences in "college preparedness" on the one hand, in that poor students lack skills that enable them to benefit from college, and "credit constraints" on the other hand. One explanation that has been neglected in this analysis consists of differences in information sets between the poor and the rich - for example about career opportunities-translating into different perceptions of individual returns to college. Data on people's subjective expectations of returns allow to take this factor into account and to directly address the following identification problem: conditional on their information sets poor people might expect low returns and thus decide not to attend. Or they might face high (unobserved) costs that prevent them from attending de-spite high expected returns. Conventional approaches rely on strong assumptions about people's information sets and about how they form expectations to address this identification problem. Data on people's subjective expectations of returns as well as on their schooling decisions allow me to directly estimate and compare cost distributions of poor and rich individuals. I find that poor individuals require significantly higher expected returns to be induced to attend college, implying that they face higher costs than individuals with wealthy parents. I then test predictions of a model of college attendance choice in the presence of credit constraints, using parental income and wealth as a proxy for the household's (unobserved) interest rate. I find that poor individuals with high expected returns are particularly responsive to changes in direct costs, which is consistent with credit constraints playing an important role. Evaluating potential welfare implications by applying the Local Instrumental Variables approach of Heckman and Vytlacil (2005) to my model, I find that a sizeable fraction of poor individuals would change their decision in response to a reduction in direct costs. Individuals at the margin have expected returns that are as high or higher than the individuals already attending college, suggesting that government policies such as fellowship programs could lead to large welfare gains.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 362.

in new window

Date of creation: 2010
Handle: RePEc:igi:igierp:362
Contact details of provider: Postal:
via Rontgen, 1 - 20136 Milano (Italy)

Phone: 0039-02-58363301
Fax: 0039-02-58363302
Web page:

Order Information: Web: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:igi:igierp:362. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.