Merit Aid, Student Mobility, and the Role of College Selectivity

55 Pages Posted: 5 Oct 2013 Last revised: 22 Jan 2022

See all articles by Rajashri Chakrabarti

Rajashri Chakrabarti

Federal Reserve Bank of New York

Joydeep Roy

Georgetown University; Economic Policy Institute (DC)

Date Written: September 1, 2013


In this paper, we investigate the role of college selectivity in college choice decisions (both in-state and out-of-state) of freshmen students following Georgia's HOPE scholarship program. How did HOPE affect the selectivity of colleges attended by Georgia's freshmen students? Did it induce Georgia's freshmen students who would have otherwise attended more selective out-of-state colleges to instead attend less selective in-state ones? Or was there movement to more selective ones, both in-state and out-of-state? Using student residency and enrollment data from IPEDS and selectivity data from Barron's and Peterson's, we find that in the aftermath of HOPE, Georgia freshmen attended relatively more-selective colleges overall. Disaggregating further, we find that Georgia freshmen attending in-state colleges attended more selective ones. Georgia freshmen attending out-of-state colleges were also more likely to attend more selective colleges, most likely due to an increase in the reservation price to go to out-of-state colleges following HOPE. Our results are robust to a variety of sensitivity checks and have important policy implications. In particular, Peltzman had observed in his classic 1973 paper that in-kind subsidies can induce individuals to invest in less quality-adjusted human capital than they might otherwise. The fact that Georgia freshmen attended relatively more selective colleges in the post-HOPE period allays, to some extent, the concern that state merit aid programs can adversely affect long term outcomes and human capital formation.

Keywords: merit aid, HOPE, college choice, college selectivity, subsidy, college cost

JEL Classification: H4, H7, I2

Suggested Citation

Chakrabarti, Rajashri and Roy, Joydeep, Merit Aid, Student Mobility, and the Role of College Selectivity (September 1, 2013). FRB of New York Staff Report No. 641, Rev. Jan. 2022, Available at SSRN: or

Rajashri Chakrabarti (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States


Joydeep Roy

Georgetown University ( email )

Washington, DC 20057
United States

Economic Policy Institute (DC) ( email )

1660 L Street NW, Suite 1200
Washington, DC 20036
United States

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