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Accounting for the Changing Role of Family Income in Determining College Entry
Author(s) -
Winter Christoph
Publication year - 2014
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12076
Subject(s) - counterfactual thinking , economics , estimation , demographic economics , structural estimation , family income , econometrics , economic growth , psychology , social psychology , management
Abstract In this paper, I analyze the determinants of college enrolment and the changes in these determinants over time. I propose a quantitative life‐cycle model with college enrolment. Altruistic parents provide financial support to their children. Using counterfactual experiments, I find that 24 percent of all households are financially constrained in their college decision. Constraints become more severe over time. I show that my model is consistent with a narrow college enrolment gap between students from rich and poor families, as previously reported in the empirical literature. The estimation of enrolment gaps is a popular reduced‐form approach for measuring the fraction of constrained households. My results suggest that these reduced‐form estimates are misleading, and that a structural model of parental transfers is needed to correctly identify constrained households. Further, I show that parental transfers are an important driver behind the changing role of family income as a determinant of college entry, a fact that is well documented for the US economy.

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