On 27 November at 10:00, please be invited to the upcoming Latvijas Banka’s Research seminar in which Arkādijs Zvaigzne (PhD candidate at Harvard University) will present his work: Dynamics of Financial Aid Tournaments.
MS Teams LINK
Abstract: Financial aid programs in higher education vary widely in design, including how aid is structured and the timing of provision. The design of student financial aid is critical, as the structure of one award can create powerful spillovers, potentially crowding in or crowding out resources from other programs. This paper studies the impact of financial aid provided as a repeated tournament and its dynamic treatment effects. I exploit a relative GPA-based eligibility rule in a regression discontinuity design to estimate the causal impacts of two types of aid – a tuition waiver and a stipend on top. Waivers have powerful effects on the extensive margin, increasing graduation rates by 12pp, and GPA by 0.4 standard deviations. Stipends only affect the intensive margin by increasing student GPA in the next semester by 0.3 standard deviations. I find a powerful crowding-in effect, where receiving aid in one semester significantly increases the probability of receiving it in the future. Decomposing the impact reveals that a substantial portion of the total long-term benefit of aid comes from the crowding-in of future resources, suggesting that static analyses may underestimate the full value of financial aid programs.