Working Paper: NBER ID: w19480
Authors: Amanda Pallais
Abstract: This paper estimates the sensitivity of students' college application decisions to a small change in the cost of sending standardized test scores to colleges. Using confidential ACT micro data, I find that when the ACT increased from three to four the number of free score reports that ACT-takers could send, the fraction of test-takers sending four reports rose substantially while the fraction sending three fell by an offsetting amount. Students simultaneously sent their scores to a wider range of colleges. Using micro data from the American Freshman Survey, two identification strategies show that ACT-takers sent more college applications and low-income ACT-takers attended more selective colleges after the cost change. The first strategy compares ACT-takers before and after the cost change, controlling for time trends and covariates, and the second estimates difference-in-difference regressions using SAT-takers as a control group. Back-of-the-envelope calculations suggest that by inducing low-income students to attend more selective colleges, the policy change significantly increased their expected earnings. Because the cost of sending an additional (non-free) ACT score was merely $6 throughout, this sizable behavioral change is surprising and suggests that students may use simple heuristics in making their application decisions. In such a setting, small policy perturbations can have large effects on welfare.
Keywords: college applications; cost of sending test scores; low-income students; college selectivity
JEL Codes: I21; I23; I24; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increase in the number of free score reports (C29) | Increase in the number of applications sent by ACT test-takers (I23) |
| Increase in the number of applications sent by ACT test-takers (I23) | Increased selectivity of colleges attended by low-income students (I24) |
| ACT's policy change (Z38) | Increase in the number of applications sent by ACT test-takers (I23) |
| ACT's policy change (Z38) | Increased selectivity of colleges attended by low-income students (I24) |