FOSTERING EDUCATIONAL ENROLMENT THROUGH SUBSIDIES: THE ISSUE OF TIMING

(2012) - Mario Fiorini

Journal: Journal of Applied Econometrics
Link:: https://onlinelibrary.wiley.com/doi/10.1002/jae.1214
DOI:: 10.1002/jae.1214
Links::
Tags:: #paper #NCDS #Attainment #Income
Cite Key:: [@fioriniFOSTERINGEDUCATIONALENROLMENT2012]

Abstract

In this paper we build a dynamic structural model of educational choices in which cognitive skills shape decisions. The model is estimated by maximum likelihood using cohort data where individuals are observed from birth onwards. These data are unique in that they include cognitive skills test scores collected as early as age 7. We then simulate the effect of two educational subsidies equal in cost but different in the timing of disbursement. The first consists of grants assigned directly to individuals aged between 16 and 18. The second is assigned to the parents earlier on, when the cohort is still in its childhood. The latter subsidy affects cognitive skills accumulation and in turn educational choices. Our results suggest that a direct grant in the form of a tuition subsidy might be more efficient even in the absence of short term financial constraints. Although cognitive skills accumulated during childhood play a key role in the educational decisions, an unconditional financial subsidy to parents is not the best policy. The results do not call a halt to investments in cognitive skill accumulation during childhood, but recommend that such investments should be well structured and ensure a high return.

Notes

“Although cognitive skills accumulated during childhood play a key role in the educational decisions, an unconditional financial subsidy to parents is not the best policy.” (Fiorini, 2012, p. 1)