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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.

Suggested Citation

  • Trude Gunnes & Lars J. Kirkebøen & Marte Rønning, 2012. "Financial incentives and study duration in higher education," Discussion Papers 714, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:714

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    Cited by:

    1. Ulla Hämäläinen & Kristian Koerselman & Roope Uusitalo, 2017. "Graduation Incentives Through Conditional Student Loan Forgiveness," Working Papers id:12273, eSocialSciences.
    2. Hämäläinen, Ulla & Koerselman, Kristian & Uusitalo, Roope, 2017. "Graduation Incentives Through Conditional Student Loan Forgiveness," IZA Discussion Papers 11142, Institute for the Study of Labor (IZA).
    3. Adrian Chadi & Marco de Pinto & Gabriel Schultze, 2017. "Young, Gifted and Lazy? The Role of Ability and Labor Market Prospects in Student Effort Decisions," IAAEU Discussion Papers 201705, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).

    More about this item


    Financial incentives; higher education; on-time graduation; semesters delayed; difference-in-difference;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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