Working Paper: NBER ID: w20779
Authors: Steven W. Hemelt; Kevin M. Stange
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.
Keywords: marginal pricing; student investment; higher education; tuition policy; credit accumulation
JEL Codes: I2; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased credit attempts (E51) | Increased withdrawals (E49) |
| Flat pricing (D49) | Minimal impact on students' rates of progress toward degree completion (I23) |
| Flat pricing does not significantly influence students' decisions to enroll part-time versus full-time (D49) | Other factors dominate marginal pricing effects (D40) |
| Flat pricing (D49) | Increased credit attempts (E51) |