Post-Secondary Education

Post-Secondary Education

1. Borrowing Constraints, Family Income, and Post-Secondary Financial Aid Policy

Numerous studies document important gaps in post-secondary attendance by parental income. Economists commonly attribute these differences to the role of borrowing constraints – youth from low-income families may not be able to borrow against high future earnings, so they do not attend college or university even when the long-run payoff may be high. With Western PhD student Philippe Belley, Lance Lochner explores changes in the importance of family income since the early 1980s. With Alexander Monge-Naranjo, Lochner develops a new human capital framework that incorporates key features of existing government student loan programs and private lenders. This model sheds new light on the importance of ability and family income as determinants of post-secondary schooling and helps explain a number of important changes in post-secondary attendance and finance since the early 1980s. Belley, Lochner, and Marc Frenette compare the relative importance of family income as a determinant of post-secondary attendance in Canada and the U.S. and explore the extent to which financial aid policies affect the income – attendance relationship. Using the Berea Panel Survey, Ralph and Todd Stinebrickner show that the attrition of post-secondary students from low income families is largely attributed to reasons other than financial difficulties present during school.

Related Publications and Working Papers:

Lochner, Lance and Alexander Monge-Naranjo, "Credit Constraints in Education," Annual Review of Economics, Vol. 4, 2012: 225-256 (also CIBC Working Paper No. 2012-1).

Belley, Philippe, Marc Frenette, and Lance Lochner, "Post-Secondary Attendance by Parental Income in the U.S. and Canada: What Role for Financial Aid Policy?" (Earlier version: "Post-Secondary Attendance by Parental Income: Comparing the U.S. and Canada," CIBC Working Paper 2010-3.)

Lochner, Lance and Alexander Monge-Naranjo, "The Nature of Credit Constraints and Human Capital," American Economic Review, 101(6), October 2011: 2487-2529 (also CIBC Working Paper No. 2010-1).

Stinebrickner, Ralph, and Todd R. Stinbrickner, "The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using a New Panel Study," American Economic Review, December (2008).

Belley, Philippe, and Lance Lochner, "The Changing Role of Family Income and Ability in Determining Educational Achievement," Journal of Human Capital, 1(1), 2007: 37-89.

Stinebrickner, Ralph and Todd R. Stinebrickner, "Understanding Educational Outcomes of Students from Low-Income Families: Evidence from a Liberal Arts College with a Full Tuition Subsidy Program," Journal of Human Resources, 38(3) Summer 2003, 591-617.

Press References:

"A Simple Equation: More Education = More Income," Eduardo Porter, The New York Times, September 10, 2014.

"The Differences Between Low-Income Households in Canada and the U.S.," Reihan Salam, The Agenda (blog), National Review, July 31, 2014.

"What Keeps Poor U.S. Students from Going to College?" Christopher Flavelle, Chicago Tribune, July 29, 2014.

"College Cost Isn't Poor Students' Big Problem," Christopher Flavelle, BloombergView, July 28, 2014.

"Change Student-Loan System:  Researcher," Chip Martin, The London Free Press, February 11, 2011

"Editorial shorts: Midwest needs bigger share of R&D dollars," StarTribune.com, July 7, 2008.

"Don't just follow the money," Doug Lederman, Inside Higher Ed, August 24, 2007.

2. Borrowing Constraints, Early Family and Late Schooling Investments in Human Capital

Given the strong relationship between parental income and child achievement and educational attainment, economists have hypothesized that many lower income parents with young children may be borrowing constrained and unable to efficiently invest in their children. Using data from the U.S., Elizabeth Caucutt and Lance Lochner estimate that income received by families when children are young has a greater impact on child achievement and schooling than does income received by families when children are older. This indicates that borrowing constraints may, indeed, be a problem for many young families. Caucutt and Lochner then develop an overlapping-generations framework to analyze early family and late schooling investments in human capital when families and youth may be borrowing constrained. This research aims to identify the importance of borrowing constraints at different stages of life and the extent to which policies at one stage (e.g. post-secondary financial aid programmes) affect investment behavior at other stages. Flavio Cunha, James J. Heckman, Lance Lochner, and Dimitriy Masterov survey a vast multidisciplinary literature on early childhood and schooling investments. Interpreting this evidence through the lens of a lifecycle framework for human capital investment, they conclude that investments made at different stages of life are highly complementary.

Related Publications and Working Papers:

Caucutt, Elizabeth, and Lance Lochner, "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," Working Paper, 2017-3.

Caucutt, Elizabeth, and Lance Lochner, "Borrowing Constraints on Families with Young Children," in Innovation in Education, Cleveland: Federal Reserve Bank of Cleveland, 2006, pp. 39-48.

Cunha, Flavio, James J. Heckman, Lance Lochner and Dimitriy Masterov, "Interpreting the Evidence on Life Cycle Skill Formation," in E. Hanushek and F. Welch (eds.), Handbook of the Economics of Education, Vol. 1, Chapter 12, Amsterdam: Elsevier Science, 2006.

3. Time-Use

A student’s grades have consistently been found both to influence whether a student completes a particular level of schooling and to influence the earnings that the person receives upon completion of schooling. Nonetheless, relatively little is known about the process by which grades are determined. In a series of recent papers, Todd Stinebrickner and Ralph Stinebrickner use the Berea Panel Study to examine the importance of one of the most important factors in grade determination – students’ own time and effort. Results suggest that studying may have a causal effect that is more important than even college entrance exam scores.

Related Publications and Working Papers:

Stinebrickner, Ralph and Todd R. Stinebrickner. "The Causal Effect of Studying on Academic Performance," The B.E. Journal of Economic Analysis and Policy: Frontiers. Vol. 8 (2008): Iss.1 (Frontiers), Article 14. Recipient of the Arrow Prize in Economic Analysis and Policy.

Stinebrickner, Ralph and Todd R. Stinebrickner. "What Can Be Learned About Peer Effects Using College Roommates? Evidence from New Survey Data and Students From Disadvantaged Backgrounds," Journal of Public Economics, 90 (8-9) September 2006, 1435-1454.

Stinebrickner, Ralph and Todd R. Stinebrickner. "Time-Use and College Outcomes," Journal of Econometrics, 121 (1-2) July-August 2004, 243-269.

Stinebrickner, Ralph and Todd R. Stinebrickner. "Working During School and Academic Performance," Journal of Labor Economics, 21(2) April 2003, 473-491.

Press References:

"The Science of Roommates," Abigail Sullivan Moore, The New York Times, July 23, 2010.

"Warning: studying can seriously affect your grades," Marc Abrahams, The Guardian, November 17, 2009.

"Video games can shoot holes in GPA," Kate Naseef, USA Today, September 19, 2007.

"Your parents were right, scholars say: More studying leads to better grades," David Glenn, The Chronicle of Higher Education, September 7, 2007.

4. Post-Secondary School Drop-Out

Perhaps, the most basic decision that a student makes after arriving at university is whether to remain in school until graduation or to drop out at some point before. This issue has received substantial attention due to substantial differences in dropout rates by family income. In a series of papers, Todd Stinebrickner and Ralph Stinebrickner use the Berea Panel Study to provide evidence on the importance of some of these factors. They find that, while credit constraints influence the decisions of some students, the large majority of drop out should be attributed to factors other than financial difficulties. Examining non-financial explanations, they find that approximately forty percent of drop out arises because some students learn that their academic performance will be worse than expected. Students who perform poorly tend to learn that staying in school is not beneficial, and would leave school even if there is no possibility of failing out. This arises primarily because performing poorly reduces how enjoyable it is to be in school.

Related Publications and Working Papers:

Stinebrickner, Todd and Ralph Stinebrickner, "A Structural Learning Model of College Drop-out," under submission.

Stinebrickner, Todd and Ralph Stinebrickner, "Learning about Academic Ability and the College Drop-Out Decision," CIBC Working Paper 2008-6.

Stinebrickner, Ralph, and Todd R. Stinebrickner. "The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using a New Panel Study," American Economic Review, December (2008).

Stinebrickner, Ralph and Todd R. Stinebrickner. "Understanding Educational Outcomes of Students from Low-Income Families: Evidence from a Liberal Arts College with a Full Tuition Subsidy Program," Journal of Human Resources, 38(3) Summer 2003, 591-617.

Press References:

"Universities tossing at-risk undergrads an academic lifebuoy," Tamara Baluja, The Globe and Mail, December 25, 2011.

Todd Stinebrickner discusses post-secondary dropout on "The Live Drive with John Tory", NEWSTALK 1010. See the Oct. 31, 2011, show at http://www.newstalk1010.com/Episodes.aspx?PID=1756. The discussion
on dropout starts at 32:56.

"Mid-term interventions reduce university drop-out rates," Paola Loriggio, The Globe and Mail, October 30, 2011.

5. Peer Effects and Social Interactions

The degree and manner to which students interact has potentially importance implications on a variety of educational and non-educational outcomes. Braz Camargo, Ralph Stinebrickner, and Todd Stinebrickner examine the determinants of friendships created in post-secondary school. Ralph and Todd Stinebrickner estimate the effects of randomly assigned roommates on post-secondary academic outcomes.

Related Publications and Working Papers:

Conley, Tim, Nirav Mehta, Ralph Stinebrickner and Todd Stinebrickner, "Social Interactions, Mechanisms, and Equilibrium: Evidence from a Model of Study Time and Academic Achievement," (CHCP Working Paper #2017-7), 2017.

Camargo, Braz, Ralph Stinebrickner and Todd R. Stinebrickner. "Interracial Friendships," forthcoming, The Journal of Labor Economics.

Stinebrickner, Ralph and Todd R. Stinebrickner. "The Causal Effect of Studying on Academic Performance," The B.E. Journal of Economic Analysis and Policy: Frontiers. Vol. 8 (2008): Iss.1 (Frontiers), Article 14. Recipient of the Arrow Prize in Economic Analysis and Policy.

Stinebrickner, Ralph and Todd R. Stinebrickner. "What Can Be Learned About Peer Effects Using College Roommates? Evidence From New Survey Data and Students From Disadvantaged Backgrounds," Journal of Public Economics, 90 (8-9) September 2006, 1435-1454.

Press References:

"Study: Racial Harmony Begins in the Dorm Room," Daniel de Vise, College Inc. (blog), The Washington Post, October 18, 2010.

6. Contribution of Post-Secondary Education to National Human Capital Stocks

The post-secondary education sector provides a key source of human capital for modern economies. This work discusses the difficulties of measuring the output of the post-secondary sector. It provides new measures of the output and how it changes over time, comparing the output of the post-secondary sectors in Canada and the United States.

Related Publications and Working Papers:

Bowlus, Audra, and Chris Robinson, "The Contribution of Post-Secondary Education to Human Capital Stocks in Canada and the United States." CIBC Working Paper #2005-1, 2005.

7. Efficiency and Equity Effects of Higher Education Policies in General Equilibrium

Elizabeth Caucutt and Krishna Kumar develop a simple dynamic general equilibrium framework to evaluate the consequences of further increasing higher education subsidies for inequality, welfare, and efficiency. This work focuses on three policies. The first is a tax and subsidy scheme that ensures that the parental decision to send a child to college is independent of income. Such a policy decreases the efficiency of the utilization of education resources, while the welfare gain is minimal. The second policy maximizes the fraction of college-educated labor. This results in a large drop in the above-mentioned efficiency with little or no welfare gain. The third is the provision of merit-based aid to the poor as opposed to purely need-based aid. This policy can increase education efficiency with little decrease in welfare. Based on these experiments, Caucutt and Kumar conclude that the case for further increases in higher education subsidies is overstated.

Related Publications and Working Papers:

Caucutt, Elizabeth M. and Krishna B. Kumar, "Higher Education Subsidies and Heterogeneity: A Dynamic Analysis," Journal of Economic Dynamics and Control, 27 (8) 2003: 1459-1502.

8. Changes in Higher Education in China

John Whalley and co-authors document the major transformation of higher education underway in China since 1999 and evaluate its potential global impacts. Reflecting China's commitment to continued high growth through quality upgrading and the production of ideas and intellectual, this transformation focuses on major new resource commitments to tertiary education and also embodies significant changes in organizational form. This focus on tertiary education differentiates the Chinese case from other countries who at similar stages of development stressed primary and secondary education. The number of undergraduate and graduate students in China has grown at approximately 30% per year since 1999, and the number of graduates at all levels of higher education in China has approximately quadrupled in the last six years. Prior to 1999, increases in these areas were much smaller. Much of the increased spending is focused on elite universities, and new academic contracts differ sharply from earlier ones with no tenure and annual publication quotas often used. All of these changes have already had large impacts on China's higher educational system and are beginning to be felt by the global educational structure.

Related Publications and Working Papers:

Yao Li, John Whalley, Shunming Zhang, and Xiliang Zhao, "The Higher Educational Transformation of China and Its Global Implications," NBER Working Paper 13849, March 2008.

Press References:

"Documenting China's Higher Ed Explosion," Doug Lederman, Inside Higher Ed, November 8, 2010.

9. Learning about Ability and Post-Secondary Outcomes

A more comprehensive understanding of many post-secondary outcomes requires a better understanding about the process by which students learn about their academic ability and other schooling-related factors. In a series of papers, Todd Stinebrickner and Ralph Stinebrickner use unique data from the Berea Panel Study to provide some of the first direct evidence about the role of this type of learning. They find that approximately forty percent of drop-out is explained by what a student learns about his/her ability. They also find that virtually all of the substantial movement away from Math and Science majors can be explained by what a student learns about his/her ability to perform well in these areas.

Related Publications and Working Papers:

Stinebrickner, Todd and Ralph Stinebrickner, "Academic Performance and College Dropout: Using Longitudinal Expectations Data to Estimate a Learning Model," Journal of Labor Economics, 32(3), July 2014.

Stinebrickner, Todd and Ralph Stinebrickner, "Math or Science? Using Longitudinal Expectations Data to Examine the Process of Choosing a College Major," CIBC Working Paper 2011-1.

Stinebrickner, Todd and Ralph Stinebrickner, "Learning about Academic Ability and the College Drop-Out Decision," CIBC Working Paper 2008-6.

Press References:

"Rewarding Rigor: U.S. News tweaks its college-ranking formula," Naomi Schaefer Riley, weeklystandard.com, October 2,2017

"One University’s Novel Solution to Its First-Year Drop-Out Problem," Macleans.ca, Macleans, February 17, 2015.

"College Men Really Hate Studying, Love Partying," Catherine Rampell, Washington Post, March 11, 2014.

"Starting College? Here's how to Graduate with a Job," Jim Tankersley, The Washington Post, August 9, 2013.

"Why Students Don't Major in Science," Cass R. Sunstein, Bloomberg, July 17, 2013.

"Why We Shouldn't Force Students to Study Science," Todd Pettigrew, Maclean's On Campus, July 15, 2013.

"Math, Science Popular Until Students Realize They're Hard," Khadeeja Safdar, The Wall Street Journal, July 8, 2013.

Blogs by Slate, Freakonomics, and the Marginal Revolution discuss Todd Stinebrickner's findings on the difficulty of majoring in science.

"Mid-term interventions reduce university drop-out rates," Paola Loriggio, The Globe and Mail, October 30, 2011.

10. The Role of Uncertainity, Preferences and Credit Constraints for College Attendance Decisions

Quantifying the role played by financial constraints, preferences, abilities and informational differences on the individual's decision of whether to get a college education is key to understanding differences in human capital accumulation. Cunha, Heckman and Navarro develop and apply a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college. Navarro generalizes the methodology and uses microdata on earnings, schooling and consumption to infer the agent’s information set and estimate a model of college choice and consumption under uncertainty with equilibrium borrowing constraints. In both papers, earnings are found to be highly predictable by students when they are deciding whether to attend college. Liquidity constraints are found to play a very small role in the decision, while uncertainty, preferences and especially ability differences have the most explanatory power.

Related Publications and Working Papers:

Navarro, Salvador, "Using Observed Choices to Infer Agent's Information: Reconsidering the Importance of Borrowing Constraints, Uncertainty and Preferences in College Attendance," Working Paper, 2008.

Cunha, Flavio, James Heckman and Salvador Navarro, "Separating Uncertainty from Heterogeneity in Life Cycle Earnings," Oxford Economic Papers, 57, 2005.

11. Student Loan Repayment

Rising costs of higher education, student debt levels and student loan default rates have heightened tensions within post-secondary student loan programs.  Debts must be repaid by those who can afford it, but there is concern that some low-income borrowers in delinquency and default are financially unable to meet their obligations.  This has prompted calls for expanding repayment assistance and a move to income-contingent repayment schemes.  Using longitudinal data following baccalaureate recipients in the U.S. from 1993 to 2003, Lance Lochner and Alexander Monge-Naranjo study expected losses on loans to different students based on various demographic characteristics, course of study/major, characteristics of the institution they attended, student debt levels, and post-school earnings.  Lance Lochner, Todd Stinebrickner, and Utku Suleymanoglu analyze repayment problems in Canada using unique survey and administrative data from the Canada Student Loans Program.  They find that, in addition to personal income, access to savings and family support are crucial to determining which students have problems repaying their loans.  They further show that efforts to expand income-based repayment schemes to automatically cover all borrowers would lead to dramatic reductions in repayment and program revenue over the first few years of repayment, threatening the sustainability of student lending.

Related Publications and Working Papers:

Lance Lochner and Alexander Monge-Naranjo, "Student Loans and Repayment: Theory, Evidence and Policy," CIBC Working Paper 2014-5.

Lance Lochner and Alexander Monge-Naranjo, "Default and Repayment Among Baccalaureate Degree Earners," CIBC Working Paper 2014-1.

Lance Lochner, Todd Stinebrickner and Utku Suleymanoglu, "The Importance of Financial Resources for Student Loan Repayment," CIBC Working Paper 2013-7.

Lance Lochner, Todd Stinebrickner and Utku Suleymanoglu,"Analysis of the CSLP Student Loan Defaulter Survey and Client Satisfaction Surveys," CIBC Working Paper 2013-3.

Press References:

"Obama's Community-College Gamble," Robert J. Samuelson, The Washington Post, February 4, 2015.

"Will You Be Able to Repay That Student Loan?" Sarah Green, HBR Blog Network, May 21, 2014.

"Western University Experts Highlight Student Debt," John Matisz, Metro, May 20, 2013.