Panel Paper: Testing Means-Tested Aid

Monday, June 13, 2016 : 11:50 AM
Clement House, 3rd Floor, Room 02 (London School of Economics)

*Names in bold indicate Presenter

Richard Murphy1,2 and Gill Wyness1,3, (1)Centre for Economic Performance, London School of Economics, (2)University of Texas at Austin, (3)UCL Institute of Education
Billions of pounds per year is spent on aid for poor students in HE systems around the world, yet there remains limited evidence on the causal effect of these payments, particularly on the intensive margin. This is an empirical challenge since student aid is correlated with characteristics which influence both college enrolment and achievement. We overcome these challenges by studying a unique form of non-linear means tested financial aid which is unadvertised, varies substantially across institutions, and is subject to shifts in generosity across cohorts. Using student-level administrative data collected from 10 English universities, we study the effects of aid receipt on college completion rates, annual course scores, and degree class, using fixed effects and instrumental variables methods. Our findings suggest that each £1,000 of financial aid awarded increases the chances of gaining a good degree by around 3 percentage points, driven by completion of the final year and course scores.