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Who Merits Financial Aid?: Massachusetts' Adams Scholarship

21 Pages Posted: 13 Mar 2007 Last revised: 24 Oct 2008

Joshua Goodman

Harvard University - Harvard Kennedy School (HKS)

Date Written: May 1, 2008

Abstract

Most states now fund merit-based financial aid programs, the effects of which depend on how strongly students react to changes in college costs. I estimate such reactions using quasiexperimental aspects of a recent Massachusetts merit scholarship program intended to attract talented students to the state's public colleges. Despite its small monetary value, the Adams Scholarship induced 6% of winners to choose four-year public colleges instead of four-year private colleges, suggesting an elasticity of demand for public college enrollment above unity. Nonetheless, most funds flowed to students who would have enrolled in public colleges absent the scholarship and the aid had no effect on winners' overall college enrollment rate, which already exceeded 90%. Regression discontinuity estimates are larger than those from difference-in-difference specifications because winners with relatively low academic skill, and thus nearest the treatment threshold, reacted much more strongly to the price change than did highly skilled winners. Conditional on academic skill, low-income winners reacted similarly to their higher income peers, suggesting that previous research may have mistaken income heterogeneity for skill heterogeneity.

Keywords: financial aid, merit scholarships, college choice, regression discontinuity

JEL Classification: I20, I22, I28

Suggested Citation

Goodman, Joshua, Who Merits Financial Aid?: Massachusetts' Adams Scholarship (May 1, 2008). Journal of Public Economics, Vol. 92, No. 10, 2008. Available at SSRN: https://ssrn.com/abstract=969363 or http://dx.doi.org/10.2139/ssrn.969363

Joshua Goodman (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/joshua-goodman/

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