ProPelled: The Effects of Grants on Graduation and Earnings

Open to PhD students and faculty engaged in causal inference in education research.

About CIERS:

The objective of the Causal Inference in Education Research Seminar (CIERS) is to engage students and faculty from across the university in conversations around education research using various research methodologies. This seminar provides a space for doctoral students and faculty from the School of Education, Ford School of Public Policy, and the Departments of Economics, Sociology, Statistics, and Political Science to discuss current research and receive feedback on works-in-progress. Discourse between these schools and departments creates a more complete community of education scholars, and provides a networking opportunity for students enrolled in a variety of academic programs who share common research interests. Open to PhD students and faculty engaged in causal inference in education research.

Abstract:

We estimate the effect of grant aid on poor students' college graduation and earnings using student-level administrative data from four-year public colleges in Texas. To identify these effects, we exploit a discontinuity in grant generosity as a function of family income. While eligibility for additional grant aid has small contemporaneous effects on attainment, it significantly increases four-, five-, and six-year graduation rates. Corresponding to the increases in degree receipt, eligibility also generates persistent earnings gains beginning four years after entry. We project that within ten years, the additional federal income tax revenue generated from eligible students' earnings gains would be sufficient for the government to fully recoup the cost of the additional grant aid expenditures. We develop a theoretical model and a novel empirical test for treatment effects on subgroups defined by their endogenous responses to treatment that can be used in instrumental variables applications with monotonicity in the second stage. Our test rejects the traditional credit constraints model. Our theoretical framework also produces sufficient statistics for assessing the welfare implications of changes in grant generosity. While increases in grant generosity would be welfare improving in the setting we examine, our framework can be applied in other settings where welfare implications are less clear-cut.

This is a joint paper with Jeff Denning (Brigham Young University) and Ben Marx (University of Illinois, Urbana-Champaign)

• graduation
• Grants
• Earnings