Success Begets Success: The Dynamic Treatment Effects of Financial Aid Tournaments

Arkadijs Zvaigzne

MPRA Paper from University Library of Munich, Germany

Abstract: Financial aid programs in higher education vary widely in design, including how aid is structured and the timing of provision. This paper studies the impact of financial aid provided as a repeated tournament and its dynamic treatment effects. Pooling administrative data that captures 32% of all tertiary students in a single European country, I exploit a relative GPA-based eligibility rule in a regression discontinuity design to estimate the causal impacts of two types of aid: tuition waivers and stipends. Both forms of aid yield large returns; waiver (stipend) eligibility increases graduation rates by 12.4 (6.6) percentage points, and increases student next-semester GPA by 0.38 (0.21) standard deviations. I find a powerful crowding-in effect, where receiving aid in one semester significantly increases the probability of receiving it in the future, driving a substantial portion of the total long-term benefit. Exploring tournament heterogeneity reveals a distinct life-cycle of aid: early-semester awards appear to be most effective, with the effectiveness diminishing in later semesters. Finally, I show that while short-term tournament incentives exhibit dynamic complementarity by maximizing the effort of high-achieving students, the long-term impact on degree attainment is deeply compensatory for lower-achieving students. These findings reveal a dual-margin response: while competitive aid incentivizes academic effort from top performers, its long-term impact operates by retaining and graduating marginal students.

Keywords: Student Financial Aid; Higher Education (search for similar items in EconPapers)
JEL-codes: H40 H52 I21 I22 I23 I28 (search for similar items in EconPapers)
Date: 2026
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