Chris Taber

A Dynamic Model of College Entrance and Completion

Abstract:  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 paper develops and estimates a dynamic structural model of college enrollment and completion with rich individual heterogeneity to assess how various factors influence college dropout and graduation. We estimate the model using data from longitudinal surveys, meta-analysis, and experimental evidence from randomized control trials. Results suggest 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 pre-college preparedness or cognitive skills leads to more substantial effects on college completion than broad financial aid policies.