A Dynamic Model of College Entrance and Completion

Résumé

Over the past four decades, the earnings gap between college graduates and non-graduates has significantly widened, prompting interest in policies aimed at promoting higher education among low-income students to enhance their earning potential. A key challenge for the success of these policies is the high college dropout rate. This study examines the effectiveness of two policy approaches: one focused on affordability and the other on preparedness. We develop a dynamic structural model that encompasses the various factors influencing college attendance and graduation. The model is estimated using data from the National Longitudinal Survey of Youth, as well as two large- scale randomized control trials. Preliminary findings indicate that making tuition completely free yields only a modest impact on college graduation rates, considering the enormous cost, and most of the benefits are inframarginal and primarily accrue to students from wealthier families. In contrast, increasing college preparedness leads to more substantial effects on college completion. (with Doulas Harris and Alan Yang)