The Incentive Effects of Higher Education Subsidies on Student Effort

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper uses a game-theoretic model to analyze the disincentive effects of low-tuition policies on student effort. The model of parent and student responses to tuition subsidies is then calibrated using information from the National Longitudinal Survey of Youth 1979 and the High School and Beyond Sophomore Cohort: 1980-92. I find that although subsidizing tuition increases enrollment rates, it reduces student effort. This follows from the fact that a highsubsidy, low-tuition policy causes an increase in the percentage of less able and less highly motivated college graduates. Additionally-and potentially more important-all students, even the more highly motivated ones, respond to lower tuition levels by decreasing their effort levels. This study adds to the literature on the enrollment effects of low-tuition policies by demonstrating how high-subsidy, low-tuition policies have both disincentive effects on students' study time and adverse affects on human capital accumulation.

A simple economic theory of skill accumulation and schooling decisions

“…In turn, this would simply provide less incentives to accumulate human capital, not more. This intuition complements a recent calibration exercise proposed by Sahin (2003) who finds that subsidizing tuition increases enrollment rates but reduces student effort, hence human capital accumulation. 13 The failure of subsidies to improve educational outcomes is something our model shares with "pure signaling" models of education, i.e.…”

“…3 As in our paper, human capital accumulation in such models suffers when incentives to student achievement are weak. For example see the studies by Betts (1998) and Sahin (2003) on the economic impact of education standards and financing. What sets our model apart is the root of productivity disparities.…”

A study on effects of and stance over tuition fees

“…However, in our study we found no age-dependent effect of tuition fees on duration of studies or dropout rate, respectively. Though one might argue that tuition fees in Cologne have been rather low other studies have shown that public share aiming at reducing financial burden of students was accompanied by even prolonged duration of studies and lower performance of students [ 16 ], [ 22 ]. One can speculate, that recognizing medical studies as a course of studies with very high prestige might have prompted students to successfully finish “at all costs”.…”

Studiengeb�hren in Deutschland: Drei Thesen und ihr empirischer Gehalt

“…Sahin (2004) untersucht den Effekt von Studiengebühren auf die Anstrengung von Studierenden. In einem auf die USA kalibrierten Modell zeigt er, dass das Bemühen von Studierenden, auch der stark motivierten, mit höherer finanzieller Förderung zurückgeht.…”