Peer Effects, Financial Aid, and Selection of Students into Colleges and Universities: An Empirical Analysis

Dennis Epple, Richard Romano and Holger Sieg

No 00-02, Working Papers from Duke University, Department of Economics

Abstract: The goal of this paper is to develop predictions regarding market consequences of peer effects in higher education and to offer empirical evidence about the extent to which those predictions are borne out in the data. We develop a model in which colleges seek to maximize the quality of the educational experience provided to their students. From this model we deduce predictions about the hierarchy of schools that emerges in equilibrium, the allocation of students by income and ability among schools, and about the pricing policies that schools adopt. In the empirical analysis, we use both university-level data provided primarily by Petersons and student-level data from the National Postsecondary Student Aid Study obtained from the NCES. The findings of this paper suggest that there is a hierarchy of school qualities which is characterized by substantial stratification by income and ability. The evidence on pricing by ability is supportive of positive peer effects in educational achievement from high ability at the college level. However, the evidence on pricing also suggests that more highly ranked schools exercise some degree of market power. This is reflected in the substantial variation of price with income coupled with discounts to more able students that are modest at best.

JEL-codes: C33 D58 I21 (search for similar items in EconPapers)
Date: 2000
New Economics Papers: this item is included in nep-edu
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.econ.duke.edu/Papers/Abstracts00/abstract.00.02.html main text

Related works:
Journal Article: Peer effects, financial aid and selection of students into colleges and universities: an empirical analysis (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:duk:dukeec:00-02

Access Statistics for this paper

More papers in Working Papers from Duke University, Department of Economics Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097.
Bibliographic data for series maintained by Department of Economics Webmaster ().