Understanding the Income Gradient in College Attendance in Mexico: The Role of Heterogeneity in Expected Returns

By Katja Kaufmann. 2014

137 citations recorded by the source corpus.

Differences in college enrollment between poor and rich are striking in Latin America. Explanations such as differences in college preparedness and credit constraints have been advanced. An alternative explanation could be differences in information sets between poor and rich, for example, about career opportunities, translating into different expected returns to college. Poor people might expect low returns and thus decide not to attend or they might face high (unobserved) costs that prevent them from attending despite high expected returns. I use data on people's subjective expectations of returns to address this identification problem. I find that poor individuals require higher expected returns to be induced to attend college than individuals from rich families. Testing predictions of a model of college attendance shows that poor individuals are particularly responsive to changes in direct costs, which is consistent with them being credit constrained. Performing counterfactual policy experiments, I find that a sizeable fraction of poor individuals would change their decision in response to a reduction in direct costs and that these individuals at the margin have expected returns that are as high or higher than the individuals already attending college.

Subfields: Accounting, Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/8b29fcf310a3c60f48e8496263df4fcd4ce16622

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Citations in the corpus

Education choices and returns to schooling: Mothers' and youths' subjective expectations and their role by gender (2014, methodology): “The reason for the chosen income thresholds is their approximate correspondence with eligibility requirements for receiving fellowships (even though they are quantitatively not very important, see Kaufmann (2009)).”
From Late to MTE: Alternative Methods for the Evaluation of Policy Interventions (2016, background): “…and Urzúa, 2007), and the returns to attending college (see e.g. Carneiro, Heckman, and Vytlacil, 2011 for the U.S., Balfe, 2015 for the U.K., Kamhöfer, Schmitz, and Westphal, 2015, for Germany, and Nybom, 2014, for Sweden as well as Kaufmann, 2014, on the role of credit constraints in Mexico).”
The Impact of Free Secondary Education: Experimental Evidence from Ghana (2021, unknown): “This suggests that the finding in Jensen (2010) that eighth-grade boys in the Dominican Republic underestimate the returns to secondary school is not general (see also Kaufmann 2014, Benhassine et al. 2015, and Nguyen 2008).”