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ERIC Number: ED517701
Record Type: Non-Journal
Publication Date: 2004-Aug
Pages: 39
Abstractor: As Provided
Reference Count: 32
ISBN: N/A
ISSN: N/A
The Incentive Effects of Higher Education Subsidies on Student Effort. Staff Report No. 192
Sahin, Aysegul
Federal Reserve Bank of New York
This paper uses a game-theoretic model to analyze the disincentive effects of low-tuition policies on student effort. The model of parent and student responses to tuition subsidies is then calibrated using information from the National Longitudinal Survey of Youth 1979 and the High School and Beyond Sophomore Cohort: 1980-92. I find that although subsidizing tuition increases enrollment rates, it reduces student effort. This follows from the fact that a high-subsidy, low-tuition policy causes an increase in the percentage of less able and less highly motivated college graduates. Additionally--and potentially more important--all students, even the more highly motivated ones, respond to lower tuition levels by decreasing their effort levels. This study adds to the literature on the enrollment effects of low-tuition policies by demonstrating how high-subsidy, low-tuition policies have both disincentive effects on students' study time and adverse affects on human capital accumulation. Appendices include: (1) Computation of discounted lifetime utility of consumption; and (2) Brief descriptions of the National Longitudinal Survey of Youth 1979 (NLSY79), the High School and Beyond (HS&B) survey, and the Higher Education General Information Survey (HEGIS). (Contains 10 tables, 5 figures and 29 footnotes.)
Federal Reserve Bank of New York. 33 Liberty Street, New York, NY 10045. Tel: 212-720-5000; Tel: 646-720-5000; e-mail: pipubs@ny.frb.org; Web site: http://www.newyorkfed.org
Publication Type: Reports - Research
Education Level: Higher Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: Federal Reserve Bank of New York
Identifiers - Assessments and Surveys: National Longitudinal Survey of Youth