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Predictors of Student Loan Repayments: A Comparison Between Public, Private For-Profit and Private Nonprofit Schools

by Mannat Bakshi and Arjun Ahluwalia

Using a sample of over 3,500 colleges from the College Scorecard Dataset , we investigate the association of average federal student loan repayment rates with institutional, regional, and student demographic characteristics of colleges. We consider educational cohorts from 2010 to 2016 at public, private for-profit, and private non-profit institutions. Our data do not allow us to see individual student characteristics, hence we control for traits of the average student in each college and focus on institutional traits that impact repayment rates. Our controls for demographics are consistent with prior research on student loan repayment rates (Lochner and Monge-Naranjo, 2014; Kelchen and Li, 2017).

We ran a Random Effects panel regression to determine how institutional, regional, and student demographic characteristics impact repayment rates. We see an important influence of the institution attended. Institution selectivity (lower admission and withdrawal rates) is associated with higher average repayment. Furthermore, the highest degree awarded is a more significant variable when it comes to describing the variation in repayment rates for public schools; private for-profit schools exhibit lower repayment rates and private nonprofit schools exhibit higher repayment rates regardless of the highest degree awarded. This could be due to a combination of signaling and screening effects. Local income and unemployment impact repayment for the average student in public and for-profit schools, but not in private non-profit schools.

A noticeable institutional finding is that, even after controlling for average school demographics, for-profit schools exhibit lower repayment rates across all types of degree-granting programs. Attending a for-profit school may be a negative signal of ability or value to potential employers. Median family income positively affects repayment twice as much for for-profit schools compared to other school types. These finding on for-profit institutions help explain Obama’s “crack down on for-profit career training colleges” (Simon & Emma, 2014).

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Advisor: Professor Genna Miller | JEL Codes: I2, I22, I26

The Effects of Health IT Innovation on Throughput Efficiency in the Emergency Department

By Michael Levin  

Overcrowding in United States hospitals’ emergency departments (EDs) has been identified as a significant barrier to receiving high-quality emergency care, resulting from many EDs struggling to properly triage, diagnose, and treat emergency patients in a timely and effective manner. Priority is now being placed on research that explores the effectiveness of possible solutions, such as heightened adoption of IT to advance operational workflow and care services related to diagnostics and information accessibility, with the goal of improving what is called throughput efficiency. However, high costs of technological process innovation as well as usability challenges still impede wide-spanning and rapid implementation of these disruptive solutions. This paper will contribute to the pursuit of better understanding the value of adopting health IT (HIT) to improve ED throughput efficiency.

Using hospital visit data, I investigate two ways in which ED throughput activity changes due to increased HIT sophistication. First, I use a probit model to estimate any statistically and economically significant decreases in the probability of ED mortality resulting from greater HIT sophistication. Second, my analysis turns to workflow efficiency, using a negative binomial regression model to estimate the impact of HIT sophistication on reducing ED waiting room times. The results show a negative and statistically significant (p < 0.01) association between the presence of HIT and the probability of mortality in the ED. However, the marginal impact of an increase in sophistication from basic HIT functionality to advanced HIT functionality was not meaningful. Finally, I do not find a statistically significant impact of HIT sophistication on expected waiting room time. Together, these findings suggest that although technological progress is trending in the right direction to ultimately have a wide-sweeping impact on ED throughput, more progress must be made in order for HIT to directly move the needle on confronting healthcare’s greatest challenges.

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Advisors: Professor Ryan McDevitt, Professor Michelle Connolly | JEL Codes: I1, I18, O33

Navigating the Maize of Poverty: Intra-Household Allocation and Investment in Children’s Human Capital in Tanzania

By Saheel Chodavadia  

Intra-household resource allocation influences investment in children’s human capital and hence influences long-term poverty levels. I study how climate shocks in Tanzania shift intra-household bargaining power and investment in children’s human capital. Past empirical work finds that bargaining power is associated with income, assets, education, and other often unobservable factors. Anthropological evidence from Tanzania suggests that male decision-makers in poor households control most income and own most assets. Conditioning on changes in total household resources due to climate shocks, I find evidence consistent with climate shocks increasing female bargaining power through a reduction in male decision-maker’s income. Specifically, climate shocks in households with more educated women increase investment in children’s education and improve anthropometric measures of health. Lastly, I comment on the usefulness of relative education as a proxy for bargaining power in contexts of data and cultural limitations on distinct assets and income streams for decision-makers.

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Advisors: Professor Robert Garlick, Professor Michelle Connolly | JEL Codes: D0, D13, I20

Incentive Programs for Neglected Diseases

By Pranav Ganapathy   

We propose and evaluate an auction mechanism for the priority review voucher program. The 2007 voucher program rewards drug developers for regulatory approval of novel treatments for neglected tropical diseases. Previous papers have proposed auctioning vouchers for the priority review voucher program but have offered neither a mathematical model nor a framework. We present a mechanism design problem with one pharmaceutical company producing one drug for a neglected tropical disease. The mechanism that maximizes the regulator’s expected surplus is a take-it-or-leave-it offer, with three different offers based on low, intermediate, and high neglected disease burdens. We demonstrate how mechanism design can be applied to settings in which the buyer pays for public access to a product with regulatory speed. Finally, this paper may be useful to policymakers seeking to improve access to voucher drugs through modifications of the program.

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Advisors: Professor David Ridley, Professor Giuseppe Lopomo, Professor Michelle Connolly| JEL Codes: I1, D44, D82

Bridging the Persistence Gap: An Investigation of the Underrepresentation of Female and Minority Students in STEM Fields

By Aaditya Jain and Bailey Kaston

Prior literature on mismatch theory has concentrated primarily on minority students, whose lower average levels of pre-enrollment preparedness tend to discourage them from persisting in STEM fields as often as their non-minority counterparts at selective universities. Our study shifts the focus to the persistence gap between men and women, invoking social cognitive career theory to investigate how factors beyond preparedness – such as self-confidence – cause women to switch out of selective STEM programs at higher rates than men. Using the High School Longitudinal Study of 2009, we investigate the drivers of STEM persistence for all students and arrive at two main conclusions. First, higher levels of STEM preparedness are more beneficial to STEM persistence at selective universities, confirming mismatch theory in the sample. We then simulate the counterfactual scenario and find that 33% of students at selective schools would have been more likely to persist in STEM had they attended less selective schools, a figure that reaches 50% for underconfident female students. This observation ties to our second conclusion – that underconfidence in math relative to one’s true performance decreases the likelihood of STEM persistence for all students at selective universities, and that female students at selective schools are more likely to be underconfident than their male counterparts. Our findings suggest that the appropriate policy solution to reduce STEM attrition rates among women should then become a two-pronged approach: (1) more selective universities should better support the STEM self-confidence levels of female students, and (2) home environments should ideally cultivate that self-confidence long before women even reach college. In our final set of analyses, we thus explore the factors that drive math overconfidence in the first place, and conclude that both student and parental biases against female STEM ability are detrimental to the STEM self-confidence of female students.

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Advisors: Professor Peter Arcidiacono, Professor Michelle Connolly | JEL Codes: I2, I24, I26

The Impact of Medicare Nonpayment: A Quasi-Experimental Approach

By Audrey Kornkven   

In October 2008, a provision of the Deficit Reduction Act of 2005 known as Medicare “Nonpayment” went into effect, eliminating reimbursement for the marginal costs of  preventable hospital-acquired conditions in an effort to correct perverse incentives in hospitals and improve patient safety. This paper contributes to the existing debate surrounding Nonpayment’s efficacy by considering varying degrees of fiscal pressure among hospitals; potential impacts on healthcare utilization; and differences between Medicare and non-Medicare patient populations. It combines data on millions of hospital discharges in New York from 2006-2010 with hospital-, hospital referral region-, and county-level data to isolate the policy’s impact. Analysis exploits the quasi-experimental nature of Nonpayment via difference-in-differences with Mahalanobis matching and fuzzy regression discontinuity designs. In line with results from Lee et al. (2012), Schuller et al. (2013), and Vaz et al. (2015), this paper does not find evidence that Nonpayment reduced the likelihood that Medicare patients would develop a hospital-acquired condition, and concludes that the policy is not likely the success claimed by policymakers. Results also suggest that providers may select against unprofitable Medicare patients when possible, and are likely to vary in their responses to financial incentives. Specifically, private non-profit hospitals appear to have been most responsive to the policy. These findings have important implications for pay-for-performance initiatives in American healthcare.

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Advisors: Professor Charles Becker, Professor Frank Sloan, Professor Grace Kim| JEL Codes: I1, I13, I18

Exploring an Alternative to Student Loans- Constructing the Demand for Income Share Agreements

By Paul Zimmer and Alex Hilsenrath

With the rapid growth in the US student loan market and rising default rates in the space, students and universities have begun to explore other methods to fund rising undergraduate education costs. This paper will seek to analyze a proposed financing solution, exploring a theoretical market for a financial mechanism known as an Income Share Agreement, or ISA. Currently, the market for ISAs is relatively unpenetrated and not institutionalized. Under a theoretical institutionalized market, the paper will pursue a framework which compares a student’s preference for an ISA versus a private student loan. The objective is to determine under what circumstances and what variables determine when a student will prefer an ISA versus a private student loan, and vice versa. We first evaluate a student’s CARA utility function under an ISA and under private debt. We find that under some degree of risk-aversion, the individual will strictly prefer the ISA financing option. Next, we introduce the concept of moral hazard in the student’s optimization problem. When solving the optimization problem, we determine that a relationship exists between degree of risk aversion, variance of the income distribution, principal amount borrowed, and student’s earning ability when choosing between an ISA and a private student loan. We then examine this relationship in the context of a mixed financing strategy and solve for the optimal mixed financing bundle. Finally, we introduce the concept of adverse selection based upon asymmetric information between the borrower and the financier.

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Advisors: Professor Curtis Taylor | JEL Codes: I2, I22, I23

The Effect of Early Life Economic Conditions on Child Health in Post-Soviet Russia

By Hemal Pragneshbhai Patel

The effect of the economic collapse on health has been extensively documented in Russia since the dissolution of the Soviet Union. The proportion of stunted children in Russia increased substantially in this period, but no study has investigated the mechanisms by which this economic collapse impacted child health outcomes. This paper uses an OLS regression followed by a Binder-Oaxaca decomposition to determine the specific economic factors that significantly contributed to this decrease in child heights.

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Advisors: Professor Charles Becker | JEL Codes: I1; I14; J13

The Effect of Tourism on Child Health Outcomes in Roatán, Honduras

By Hemal Pragneshbhai Patel

Increased tourism, especially in developing economies, brings with it more economic opportunities and avenues for development. In Roatán, the largest of Honduras’ Caribbean Bay Islands, tourism has brought economic development that the island had never before experienced. However, the impact of this economic development brought by increasing cruise ship tourism on child health has yet to be investigated. The increase in economic development is expected to improve child health through improved absorbed nutrition, and this paper uses an OLS regression model to examine how differential exposure to tourism development during a child’s crucial early life developmental window impacts later life health outcomes, proxied by height-for-age Z-scores.

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Advisors: Professor Dennis Clements, Professor Michelle Connolly | JEL Codes: I1; I15; Z32

Do Evictions Cause Income Changes? An Instrumental Variables Approach

By Grace Mok

Evictions are an important aspect of the affordable housing crisis facing low-income American renters. However, there has been little research quantifying the causal impact of evictions, which poses challenges for academics interested in understanding inequality and policy-makers interested in reducing it. Merging two datasets both new to the literature, I address this gap in the causal literature by using an instrumental variables strategy to examine the impact of evictions on household income over time in Durham, North Carolina. Exploiting gentrification-related evictions as an instrument, I find a 2.5% decrease in household income after eviction. This is a small, but significant decrease in income given that median household income for households at time of eviction is about $15,000.

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Advisors: Professor Christopher Timmins, Professor Michelle Connolly | JEL Codes: I32, R29


Undergraduate Program Assistant
Jennifer Becker

Director of the Honors Program
Michelle P. Connolly