The Effect of Promoting Access to Community Colleges on Educational and Labor Market Outcomes

Abstract

Community colleges offer an affordable postsecondary education and serve as a stepping stone to a four-year college degree. However, it is unclear how increased access to community colleges affects educational and labor market outcomes. To investigate this issue, I estimate a structural model of employment and college choices and evaluate two policy interventions designed to promote access to community colleges: tuition subsidies and easier transition from two- to four-year colleges. I find that tuition subsidies at two-year colleges increase enrollment in community colleges and the average lifetime income but decrease four-year college degree attainment. In addition, I show that the transfer policy decreases enrollment in both two- and four-year colleges but increases bachelor's degree attainment for high-ability students.

Keywords: community college, tuition subsidy, dynamic discrete choice model

JEL Classification: I22, I26, J24