Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach

Wilbert van der Klaauw

International Economic Review, 2002, vol. 43, issue 4, 1249-1287

Abstract: An important problem faced by colleges and universities, that of evaluating the effect of their financial aid offers on student enrollment decisions, is complicated by the likely endogeneity of the aid offer variable in a student enrollment equation. This article shows how discontinuities in an East Coast college's aid assignment rule can be exploited to obtain credible estimates of the aid effect without having to rely on arbitrary exclusion restrictions and functional form assumptions. Semiparametric estimates based on a regression-discontinuity (RD) approach affirm the importance of financial aid as an effective instrument in competing with other colleges for students. Copyright 2002 by the Economics Department of the University of Pennsylvania and Osaka University Institute of Social and Economic Research Association

Date: 2002
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