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High School Track Choice and Liquidity Constraints: Evidence from Urban Mexico

Ciro Avitabile, Matteo Bobba () and Marco Pariguana ()
Additional contact information
Matteo Bobba: Toulouse School of Economics
Marco Pariguana: University of Western Ontario

No 10506, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We study how a large household windfall affects sorting of relatively disadvantaged youth over high school tracks by exploiting the discontinuity in the assignment of a welfare program in Mexico. The in-cash transfer is found to significantly increase the probability of selecting vocational schools as the most preferred options vis-a-vis other more academically oriented education modalities. We find support for the hypothesis that the transfer relaxes the liquidity constraints preventing relatively poor students from choosing a schooling career with higher out-of-pocket expenditures and higher expected returns. The observed change in stated preferences across tracks effectively alters school placement, and bears a positive effect on on-time graduation.

Keywords: school choice; tracking; financial constraints; vocational education; returns to education; regression discontinuity design (search for similar items in EconPapers)
JEL-codes: I21 I24 J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-edu and nep-ure
Date: 2017-01
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