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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. Helena Skyt Nielsen & Torben Sørensen & Christopher Taber, 2010. "Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform," NBER Chapters, in: Income Taxation, Trans-Atlantic Public Economics Seminar (TAPES), pages 185-215 National Bureau of Economic Research, Inc.
  2. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
  3. 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.
  4. 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.
  5. Juanna Schrøter Joensen, 2010. "Timing and Incentives: Impacts of Student Aid on Academic Achievement," 2010 Meeting Papers 823, Society for Economic Dynamics.
  6. John Bound & Sarah Turner, 2007. "Understanding the Increased Time to the Baccalaureate Degree," Discussion Papers 06-043, Stanford Institute for Economic Policy Research.
  7. 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.
  8. Bas van der Klaauw & Edwin Leuven & Hessel Oosterbeek, 2006. "The effect of financial rewards on students' achievement: Evidence from a randomized experiment," Artefactual Field Experiments 00078, The Field Experiments Website.
  9. 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.
  10. 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.
  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. 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.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
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