Journal of Labor Economics Vol. 41 No. 3 2023

Testing Means-Tested Aid

Richard Murphy^1,2,3,4,5; Gill Wyness⁵

¹ National Bureau of Economic Research · ² Ifo Institute for Economic Research · ³ IZA - Institute of Labor Economics · ⁴ The University of Texas at Austin · ⁵ London School of Economics and Political Science

Abstract

We estimate the effect of an unexpected institutional financial aid (IFA) award on student outcomes using administrative data collected from nine universities, exploiting variation in IFA schedules within and across university-entry cohorts. Each £1,000 of IFA during the first year of college increases the chances of completing that year by 1.4 percentage points, improves test scores by 0.059 standard deviations, and increases the chances of graduating with a good degree by 3.4 percentage points. We find that high-ability and low-income students benefit the most and calculate outcome-maximizing and cost-minimizing IFA schedules for each university.

DOI

10.1086/719995

Volume

41

Issue

3

Pages

687-727

Language

en

Sources

semanticscholar openalex crossref

Cite

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