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Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression–Discontinuity Approach *
Author(s) -
Van Der Klaauw Wilbert
Publication year - 2002
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00055
Subject(s) - endogeneity , regression discontinuity design , classification of discontinuities , instrumental variable , discontinuity (linguistics) , econometrics , variable (mathematics) , regression , economics , regression analysis , finance , actuarial science , mathematics , statistics , mathematical analysis
An important problem faced by colleges and universities, that of evaluating the effect of their financial aid offers on student enrollment decisions, is complicated by the likely endogeneity of the aid offer variable in a student enrollment equation. This article shows how discontinuities in an East Coast college's aid assignment rule can be exploited to obtain credible estimates of the aid effect without having to rely on arbitrary exclusion restrictions and functional form assumptions. Semiparametric estimates based on a regression–discontinuity (RD) approach affirm the importance of financial aid as an effective instrument in competing with other colleges for students.