Marginal Pricing and Student Investment in Higher Education

54 Pages Posted: 22 Dec 2014

See all articles by Steven W. Hemelt

Steven W. Hemelt

University of North Carolina - Chapel Hill

Kevin Stange

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy

Date Written: December 2014

Abstract

This paper examines the effect of marginal price on students’ educational investments using rich administrative data on students at Michigan public universities. Students facing zero marginal price for credits above the full-time minimum (i.e., 12 credits) attempt and complete about the same average number of credits as those whose institutions charge per credit. Zero marginal price induces a modest share of students (i.e., 7 percent) to attempt up to one additional class (i.e., 3 credits) but also increases withdrawals, resulting in little impact on earned credits or the likelihood of meeting “on-time” benchmarks toward college completion. Consistent with theory, the moderate impact on attempted credits is largest among students who would otherwise locate at the full-time minimum, which include lower-achieving and socio-economically disadvantaged students.

Suggested Citation

Hemelt, Steven W. and Stange, Kevin, Marginal Pricing and Student Investment in Higher Education (December 2014). NBER Working Paper No. w20779, Available at SSRN: https://ssrn.com/abstract=2541555

Steven W. Hemelt (Contact Author)

University of North Carolina - Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Kevin Stange

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

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