Working Paper: NBER ID: w19380
Authors: Ross Levine; Yona Rubinstein
Abstract: Banking reforms--that reduced interest rates--boosted college enrollment rates among able students from middle class families. We define "able" students as those with learning aptitude scores in the top two-thirds of the U.S. population. We define "middle class" as families in which both parents are not highly-educated (above 12 years of education) and that are neither in the bottom fourth nor in the top 10 percent of the distribution family income in the U.S. Our findings suggest that credit conditions, the ability of an individual to benefit from college, and a family's financial and educational circumstances combine to shape college decisions. The functioning of the financial system plays a powerful role in shaping the degree to which a child's educational choices--and hence economic opportunities--are defined by parental income.
Keywords: banking reforms; interest rates; college enrollment; educational opportunities; financial constraints
JEL Codes: G21; G28; G38; I21; I22; I24; J08; J24; O15; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Banking reforms that reduced interest rates (G21) | Increased college enrollment rates among able students from middle-class families (I24) |
| State deregulation (L51) | Increased probability of able students attending college (D29) |
| Easing credit conditions (E51) | Significant impacts on educational opportunities for students from families with less than 12 years of education (I24) |
| Reduced interest rates (E43) | No significant changes in college attendance rates for students from lower-income families (I24) |
| Reduced interest rates (E43) | No significant changes in college attendance rates for students from higher-income families (I24) |
| Banking reforms (G28) | Increased probability of attending college for able students from disadvantaged backgrounds (I24) |