IDEAS home Printed from https://ideas.repec.org/
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 to College

  • Katja Kaufmann

    (Innocenzo Gasparini Institute for Economic Research (IGIER))

This paper studies the determinants of college attendance in Mexico. I use subjective quantitative expectations of future earnings to analyze both causes and implications of the steep income gradient in higher-education enrollment. I find that poor individuals require significantly higher expected returns to be induced to attend college. I then test predictions of a simple 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 such as tuition, which is consistent with credit constraints playing an important role. To evaluate potential welfare implications of introducing a means-tested student loan program, I apply the Local Instrumental Variables approach of Heckman and Vytlacil to my model. I find that a sizeable fraction of poor individuals would change their decision in response to a reduction in interest rate, and that individuals at the margin have higher expected returns than the individuals already attending college. This suggests that policies such as government student loan 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: http://www-siepr.stanford.edu/repec/sip/07-040.pdf
Download Restriction: no

Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 07-040.

as
in new window

Length:
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:sip:dpaper:07-040
Contact details of provider: Postal:
366 Galvez Street, Stanford, California 94305-6015

Phone: (650) 725-1874
Fax: (650) 723-8611
Web page: http://siepr.stanford.edu

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Heckman, James J. & Urzua, Sergio & Vytlacil, Edward, 2006. "Understanding Instrumental Variables in Models with Essential Heterogeneity," IZA Discussion Papers 2320, Institute for the Study of Labor (IZA).
  2. Charles T. Clotfelter & Michael Rothschild, 1993. "Introduction to "Studies of Supply and Demand in Higher Education"," NBER Chapters, in: Studies of Supply and Demand in Higher Education, pages 1-10 National Bureau of Economic Research, Inc.
  3. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
  4. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post--secondary Schooling," Economic Journal, Royal Economic Society, vol. 112(482), pages 705-734, October.
  5. Orazio Attanasio & Katja Kaufmann, 2009. "Educational Choices, Subjective Expectations, and Credit Constraints," NBER Working Papers 15087, National Bureau of Economic Research, Inc.
  6. Cunha, Flavio & Heckman, James J. & Navarro, Salvador, 2004. "Separating Uncertainty from Heterogeneity in Life Cycle Earnings," IZA Discussion Papers 1437, Institute for the Study of Labor (IZA).
  7. Belzil, Christian & Hansen, Jörgen, 2002. "Earnings Dispersion, Risk Aversion and Education," CEPR Discussion Papers 3600, C.E.P.R. Discussion Papers.
  8. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects and Econometric Policy Evaluation," NBER Technical Working Papers 0306, National Bureau of Economic Research, Inc.
  9. Belzil, Christian & Hansen, Jörgen, 2001. "Heterogeneous Returns to Human Capital and Dynamic Self-Selection," IZA Discussion Papers 272, Institute for the Study of Labor (IZA).
  10. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  11. N/A, 2007. "At a Glance," National Institute Economic Review, National Institute of Economic and Social Research, vol. 200(1), pages 2-3, April.
  12. Julian R. Betts, 1996. "What Do Students Know about Wages? Evidence from a Survey of Undergraduates," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 27-56.
  13. Cunha, Flavio & Heckman, James J., 2007. "Identifying and Estimating the Distributions of Ex Post and Ex Ante Returns to Schooling," Labour Economics, Elsevier, vol. 14(6), pages 870-893, December.
  14. Robert J. Willis & Sherwin Rosen, 1978. "Education and Self-Selection," NBER Working Papers 0249, National Bureau of Economic Research, Inc.
  15. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March.
  16. Jeff Dominitz & Charles F. Manski, 1994. "Eliciting Student Expectations Of The Returns To Schooling," Econometrics 9411002, EconWPA.
  17. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
  18. Mario Padula & Luigi Pistaferri, 2001. "Education, Employment and Wage Risk," CSEF Working Papers 67, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  19. Jeffrey R. Kling, 2000. "Interpreting Instrumental Variables Estimates of the Returns to Schooling," NBER Working Papers 7989, National Bureau of Economic Research, Inc.
  20. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-53, April.
  21. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  22. Jere R. Behrman & Alejandro Gaviria & Miguel Székely, 2002. "Social Exclusion in Latin America: Introduction and Overview," Research Department Publications 3141, Inter-American Development Bank, Research Department.
Full references (including those not matched with items on IDEAS)

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:sip:dpaper:07-040. 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: (Anne Shor)

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.