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Financial incentives and study duration in higher education

  • Trude Gunnes


    (Department of Economics, Norwegian University of Science and Technology)

  • Lars J. Kirkebøen
  • Marte Rønning

The current paper investigates to which extent students in higher education respond to financial incentives by adjusting their study behavior. Students in Norway who completed certain graduate study programs between 1991 and 1995 on stipulated time were entitled to a restitution (of approximately 3,000 USD) from the Norwegian State Educational Loan Fund. Using a difference-in-difference approach, we find that the fraction of students graduating on time during the reform period increased by 10 percent, relative to a base probability of about 25 percent. The estimated effect for fully treated students (students who were aware of the reform from the start of their studies) is much higher, at 50 percent.

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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 11511.

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Length: 22 pages
Date of creation: 05 May 2011
Date of revision:
Handle: RePEc:nst:samfok:11511
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  1. 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.
  2. Dynarski, Susan, 2004. "The New Merit Aid," Working Paper Series rwp04-009, Harvard University, John F. Kennedy School of Government.
    • 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.
  3. Giorgio Brunello & Rudolf Winter-Ebmer, 2002. "Why Do Students Expect to Stay Longer in College? Evidence from Europe," Economics working papers 2002-10, Department of Economics, Johannes Kepler University Linz, Austria.
  4. 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.
  5. Maria Knoth Humlum & Rune Majlund Vejlin, 2009. "The Effects of Financial Aid in High School on Academic and Labor Market Outcomes: A Quasi-Experimental Study," Economics Working Papers 2009-02, School of Economics and Management, University of Aarhus.
  6. Susan M. Dynarski, 1999. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," NBER Working Papers 7422, National Bureau of Economic Research, Inc.
  7. Lindbeck, Assar & Nyberg, Sten & Weibull, Jörgen W., 1997. "Social Norms and Economic Incentives in the Welfare State," Working Paper Series 476, Research Institute of Industrial Economics.
  8. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
  9. Booij, A.S. & Leuven, E. & Oosterbeek, H., 2010. "The role of information in the take-up of student loans," Working Papers 32, Top Institute for Evidence Based Education Research.
  10. Helena Skyt Nielsen & Torben Sørensen & Christopher R. Taber, 2008. "Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform," NBER Working Papers 14535, National Bureau of Economic Research, Inc.
  11. Basit Zafar, 2013. "College Major Choice and the Gender Gap," Journal of Human Resources, University of Wisconsin Press, vol. 48(3), pages 545-595.
  12. Martin Heineck & Mathias Kifmann & Normann Lorenz, 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), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 226(1), pages 82-109, January.
  13. Ruhm, Christopher J, 1997. "Is High School Employment Consumption or Investment?," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 735-76, October.
  14. 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.
  15. 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.
  16. John Bound & Sarah Turner, 2007. "Understanding the Increased Time to the Baccalaureate Degree," Discussion Papers 06-043, Stanford Institute for Economic Policy Research.
  17. Juanna Schrøter Joensen, 2010. "Timing and Incentives: Impacts of Student Aid on Academic Achievement," 2010 Meeting Papers 823, Society for Economic Dynamics.
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