Who benefits from student aid? The economic incidence of tax-based federal student aid

Federal benefit programs, including federal student aid, are designed to aid targeted populations. Behavioral responses to these programs may alter the incidence of their benefits, a possibility that receives less attention in the literature compared to tax incidence. I demonstrate the importance of benefit incidence analysis by showing that the intended cost reductions of tax-based federal student aid are substantially offset by institutional price increases for a sample of 4-year colleges and universities. Contrary to the goal of policymakers, I find that tax-based aid crowds out institutional aid roughly dollar-for-dollar. Unfortunately, it is not clear how institutions utilize these captured resources, so that the ultimate incidence of the programs is uncertain.     

Suing for your supper? Resource allocation, teacher compensation and finance lawsuits

Despite a large literature examining the effect of litigation on education finance and student achievement, there is relatively little recent evidence about how extra resources generated by litigation are spent. This paper uses national data to examine the effects of high court finance rulings from 1991 to 2002 on school districts’ education spending: including the categories of capital, plant, and support expenses as well as the teacher wage bill. It also decomposes the latter change into a quantity effect from teacher hiring and a price effect due to increased wages. I find that the largest spending increase comes from salary increases to teachers, with other large increases for hiring more instructors and increasing support spending. Further evidence suggests that the higher salaries are manifest more in an increased experience premium rather than higher salaries for new teacher hires. This evidence helps rationalize the role teachers unions play in supporting, and sometimes originating finance lawsuits.     

The impact of merit-based financial aid on college enrollment: A field experiment

Merit-based financial aid awards have become increasingly prevalent in the pricing policies of higher education institutions. This study utilizes an experiment to estimate the efficacy of merit-aid awards in achieving the institutional objective of attracting the most academically desirable applicants. I find that merit aid has a statistically significant but inelastic effect on enrollment of extremely high ability students. Additionally, the setting of this paper allows for a test of whether students respond to the framing of price in making enrollment decisions (i.e. price illusion), holding net price constant. There is weak evidence in support of price illusion among this set of students.     

Education inputs,student performance and school finance reform in Michigan

This paper estimates the impact of the Michigan school finance reform, Proposal A, on education inputs and test scores. Using a difference-in-difference estimation strategy, I find that school districts in Michigan used the increase in educational spending generated through Proposal A to increase teacher salaries and reduce class size to a smaller extent. Then, using the foundation allowance created by Proposal A as an instrument, I estimate the causal effect of increased spending on 4th and 7th grade math scores for two test measures – a scaled score and a percent satisfactory measure – and find positive effects of increased spending on 4th grade test scores. A 60% increase in spending increases the percent satisfactory score by one standard deviation. The positive impact of expenditures on test performance seems largely due to higher teacher salaries.     

Does generosity beget generosity? Alumni giving and undergraduate financial aid

We investigate how undergraduates’ financial aid packages affect their subsequent donative behavior as alumni. We analyze micro data on alumni giving at an anonymous research university, and focus on three types of financial aid, scholarships, loans, and campus jobs. Consistent with the view of some professional fundraisers, we allow the receipt of a given form of aid per se to affect alumni giving.     

Expenditures and postsecondary graduation: An investigation using individual-level data from the state of Ohio

Using detailed individual-level data from public universities in the state of Ohio, I estimate the effect of various institutional expenditures on the probability of graduating from college. Using a competing risks regression framework, I find differential impacts of expenditure categories across student characteristics. I estimate that student service expenditures have a larger impact on students with low SAT/ACT scores, while instructional expenditures are more important for high test score students and those majoring in scientific/quantitative fields. The individual-level nature of these data allows me to address measurement error and endogeneity concerns the previous literature has been unable to deal with.     

Equal educational spending across districts—A case study of Taiwan

By specifying different goals of educational spending across districts, it is found that input (spending) equality and cost minimization improve both the Gini indexes of the college admission rate and public educational spending per student across different districts for the case of Taiwan. While complete output equality is not feasible, the extent to which a policy achieves output equality depends on the society's choice, and is likely to cost more. Rawls’ equity ensures a minimal college admission rate for a given district. One goal is not necessarily superior to the others, but is a choice based on society's preferences.     

Do expenditures other than instructional expenditures affect graduation and persistence rates in American higher education?

During the last two decades, median instructional spending per full-time equivalent (FTE) student at American 4-year colleges and universities has grown at a slower rate than median spending per FTE student in a number of other expenditure categories, including academic support, student services and research. Our paper uses institutional level panel data and a variety of econometric approaches, including unconditional quantile regression methods, to analyze whether these non-instructional expenditure categories influence graduation and first-year persistence rates of undergraduate students.     

The French zones d’éducation prioritaire: Much ado about nothing?

We provide an assessment of the French ZEP (Zones d’Education Prioritaire), a program started in 1982 that channels additional resources to schools in disadvantaged areas and encourages the development of new teaching projects. Focusing on middle-schools, we first evaluate the impact of the ZEP status on resources, their utilization (teacher bonuses versus teaching hours) and key establishments characteristics such as class sizes, school enrolments, teachers’ qualifications and experience, and student composition and mobility. We then estimate the impact of the ZEP program on four measures of individual student achievement: obtaining at least one diploma by the end of schooling, reaching 8th grade, reaching 10th grade and success at the Baccalauréat (the national examination at the end of high school). We take into account the endogeneity of the ZEP status by using both difference in differences and instrumental variables based on political variables. The results are the same in all cases: there is no impact on student success of the ZEP program.     

The impact of a universal class-size reduction policy: Evidence from Florida's statewide mandate

Class-size reduction (CSR) mandates presuppose that resources provided to reduce class size will have a larger impact on student outcomes than resources that districts can spend as they see fit. I estimate the impact of Florida's statewide CSR policy by comparing the deviations from prior achievement trends in districts that were required to reduce class size to deviations from prior trends in districts that received equivalent resources but were not required to reduce class size. I use the same comparative interrupted time series design to compare schools that were differentially affected by the policy (in terms of whether they had to reduce class size) but that did not receive equal additional resources. The results from both the district- and school-level analyses indicate that mandated CSR in Florida had little, if any, effect on student achievement.     

An empirical analysis of borrowing behaviour of higher education students in the Netherlands

Many higher education students combine their study with a job on the side instead of taking up a loan. This paper examines the factors underlying this apparently myopic behaviour. We find that standard economic factors explain observed borrowing decisions to some extent. Students with easier access to financial resources borrow less often. Students with good earnings prospects and/or a high discount rate borrow more often, as do students who are prepared to take risks. An important non-standard factor affecting borrowing choices is debt aversion. We also find that a reduction in working hours will only have a limited positive impact on the time spend on studying.     

Do universities benefit local youth? Evidence from the creation of new universities

In this study, I examine university and college participation rates, as well as graduate outcomes, following the establishment of a university in cities where there were previously none. The creation of a local university is associated with a large increase in university attendance among local youth in each affected city. However, the increase in university participation came at the expense of college participation in most cities. Furthermore, not everyone benefited equally from new universities in terms of university enrolment. In the short run, the creation of a local university is associated with a substantial increase in the probability of moving out of one city for men and women. For men, employment rates rise, while for women, there is an increase in business services and public sector employment.