Expanding Access to Selective Colleges

Lutz Hendricks, Tatyana Koreshkova and Oksana Leukhina

No 2026-005, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper studies the effects of expanding high-quality public university capacities. Using a quantitative model of college choice, we find that expanding the most selective colleges by 20 percent increases aggregate earnings by 0.8 percent and welfare by 2.2 percent. The gains arise because a large number of high-ability students are rationed out of selective colleges. When admitted, these students graduate at high rates and enjoy substantial earnings gains. These earnings gains are eight times larger than the fiscal cost of financing the expansion. Our findings remain robust when we account for peer effects in student learning.

Keywords: college quality; human capital; public finance of higher education (search for similar items in EconPapers)
JEL-codes: I23 J24 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2026-03-26, Revised 2026-06-13
New Economics Papers: this item is included in nep-dge, nep-edu and nep-lma
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DOI: 10.20955/wp.2026.005

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