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Success Begets Success: The Dynamic Treatment Effects of Financial Aid Tournaments

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  • Zvaigzne, Arkadijs

Abstract

Financial aid programs in higher education vary widely in design, including how aid is structured and the timing of provision. This paper studies the impact of financial aid provided as a repeated tournament and its dynamic treatment effects. Pooling administrative data that captures 32% of all tertiary students in a single European country, I exploit a relative GPA-based eligibility rule in a regression discontinuity design to estimate the causal impacts of two types of aid: tuition waivers and stipends. Both forms of aid yield large returns; waiver (stipend) eligibility increases graduation rates by 12.4 (6.6) percentage points, and increases student next-semester GPA by 0.38 (0.21) standard deviations. I find a powerful crowding-in effect, where receiving aid in one semester significantly increases the probability of receiving it in the future, driving a substantial portion of the total long-term benefit. Exploring tournament heterogeneity reveals a distinct life-cycle of aid: early-semester awards appear to be most effective, with the effectiveness diminishing in later semesters. Finally, I show that while short-term tournament incentives exhibit dynamic complementarity by maximizing the effort of high-achieving students, the long-term impact on degree attainment is deeply compensatory for lower-achieving students. These findings reveal a dual-margin response: while competitive aid incentivizes academic effort from top performers, its long-term impact operates by retaining and graduating marginal students.

Suggested Citation

  • Zvaigzne, Arkadijs, 2026. "Success Begets Success: The Dynamic Treatment Effects of Financial Aid Tournaments," MPRA Paper 129153, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:129153
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    Keywords

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    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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