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Financial incentives and study duration in higher education

This 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 autumn 1990 and 1995 on stipulated time were entitled to a restitution of approximately 3,000 USD from the Norwegian State Educational Loan Fund. Comparing treated and untreated (control) programs in a difference-in-difference framework, we find that the average delay in the treatment group decreased by on average 0.8 semester during the reform period, and by 1.5 semesters in the following two years. Number of years treated matter strongly, with delays reduced by 0.23 semesters per year treated. Furthermore, there is some indication that it is important that treatment starts before the final part of the educational programs. The share of on-time graduation increases by 3.8 percentage points per year treated, from a pre-reform level of about 20 percent. Thus, a large share of the restitutions given will be for students who would otherwise not have graduated on time. A series of robustness checks indicate that our estimated effects do not reflect differential trends or omitted variables.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 714.

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Date of creation: Nov 2012
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Handle: RePEc:ssb:dispap:714
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  1. 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.
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  3. 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.
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  5. Maria Knoth Humlum & Rune Majlund Vejlin, 2013. "The Responses Of Youth To A Cash Transfer Conditional On Schooling: A Quasi‐Experimental Study," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 628-649, 06.
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  7. John Bound & Sarah Turner, 2007. "Understanding the Increased Time to the Baccalaureate Degree," Discussion Papers 06-043, Stanford Institute for Economic Policy Research.
  8. Martin Heineck & Mathias Kifmann & Norman Lorenz, 2006. "A duration analysis of the effects of tuition fees for long term students in Germany," Working Papers of the Research Group Heterogenous Labor 06-05, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.
  9. 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.
  10. Dynarski, Susan, 2001. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," Working Paper Series rwp01-034, Harvard University, John F. Kennedy School of Government.
  11. Brunello, Giorgio & Winter-Ebmer, Rudolf, 2003. "Why do students expect to stay longer in college? Evidence from Europe," Economics Letters, Elsevier, vol. 80(2), pages 247-253, August.
  12. Edwin Leuven & Hessel Oosterbeek & Bas van der Klaauw, 2004. "The e ect of financial rewards on students achievement: Evidence from a randomized experiment," HEW 0410002, EconWPA.
  13. 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.
  14. Basit Zafar, 2009. "College major choice and the gender gap," Staff Reports 364, Federal Reserve Bank of New York.
  15. Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation for Research in Economics, Yale University.
  16. Leuven, Edwin & Oosterbeek, Hessel & van der Klaauw, Bas, 2003. "The Effect of Financial Rewards on Students' Achievements: Evidence from a Randomized Experiment," CEPR Discussion Papers 3921, C.E.P.R. Discussion Papers.
  17. Juanna Schrøter Joensen, 2010. "Timing and Incentives: Impacts of Student Aid on Academic Achievement," 2010 Meeting Papers 823, Society for Economic Dynamics.
  18. 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.
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