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Pré-Publication, Document De Travail Année : 2019

Countering moral hazard in higher education: The role of performance incentives in need-based grants

Résumé

National financial aid programs for disadvantaged students cover a large fraction of college students and represent a non-negligible component of the public budget. These programs often have weak performance requirements for renewal, potentially leading to moral hazard and efficiency losses. Using a reform in the Spanish need-based grant program in higher education, this paper tests the causal effect of receiving the same amount of grant under different intensities of academic requirements on student performance, degree completion and student dropout. I use administrative micro-data on the universe of applicants to the grant in a large university. Exploiting sharp discontinuities in the grant eligibility formula, I find strong positive effects of being eligible for a grant on student performance when combined with demanding academic requirements, while there are no effects on student dropout. Students improve their final exam attendance rate, their average GPA in final exams, and their probability of completing the degree. They also reduce the fraction of subjects that they have to retake. The grant has no effects on student performance when academic requirements are low and typically comparable to those set out by national need-based student aid programs around the world. These results suggest that academic requirements in the context of higher education financial aid can be an effective tool to help overcome moral hazard concerns and improve aid effectiveness.
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Dates et versions

halshs-02160365 , version 1 (19-06-2019)
halshs-02160365 , version 2 (19-11-2019)

Identifiants

  • HAL Id : halshs-02160365 , version 1

Citer

José Montalbán. Countering moral hazard in higher education: The role of performance incentives in need-based grants. 2019. ⟨halshs-02160365v1⟩
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