Essays In Finance And Inequality

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Degree type
Doctor of Philosophy (PhD)
Graduate group
Finance
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Subject
Financing Frictions
Higher Education Policy
Household Finance
Social Mobility
Student Loans
Economics
Education
Finance and Financial Management
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2022-10-05T20:22:00-07:00
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Ebrahimian, Mehran
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Abstract

Students of lower-income families invest much less in college education than higher-income families. To assess the role of financing constraints and subsidy schemes in explaining this gap, I structurally estimate a model of college choice in the presence of financing frictions. The estimation uses novel nationally representative data on US high-school and college students. I propose a novel identification strategy that relies on bunching at federal Stafford loan limits and differences between in- and out-of-state tuition. I find that the college investment gap is mainly due to fundamental factors: heterogeneity in preparedness for college and the (perceived) value-added of college. Frictionless access to student loans would substantially increase consumption during college but would leave the investment in college education mainly unaffected. I show that making public colleges tuition-free would mitigate financing constraints, but it would overall entail more than $15B deadweight loss per year and would disproportionately benefit wealthier students. Expanding Pell grants, in contrast, would benefit lower-income students at a much lower cost.

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Luke Taylor
Date of degree
2022-01-01
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