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Category Archives: I23

Revisiting California Proposition 209: Changes in Science Persistence Rates and Overall Graduation Rates

by Anh-Huy Nguyen

Abstract
California Proposition 209 outlawed race-based affirmative action in the University
of California (UC) system in 1998. However, the UC system subsequently shifted towards
race-blind affirmative action by also reweighing factors other than race in the
admissions process. To evaluate the hypothetical changes in the science persistence rate
and graduation rate of all applicants if racial preferences had been removed entirely, I
estimate baseline and counterfactual admissions models using data from between 1995-
1997. Using a general equilibrium framework to fix the total number of admits and
enrollees, I find that the removal of racial preferences leads to a cascade of minority
enrollees into less selective campuses and a surge of non-minority enrollees into more
selective campuses. The improved matching between students and campuses results in
higher science persistence rates and graduation rates across the pool of all applicants.
In particular, the gains are driven by minority students who were admitted under racial
preferences, because the gains from better matching across UC campuses outweigh the
losses from potentially being pushed outside the UC system. Non-minority students
who are originally rejected under racial preferences also benefit, as some are induced
into the system in the counterfactual, where they are more likely to graduate. I also
investigate claims that applicants may have strategically gamed during the admissions
process by misrepresenting their interest in the sciences in order to maximize their
admissions probability. While there exist incentives to apply in different majors across
the campuses, I find evidence that applicants often fail to game optimally, suggesting
that they may not be fully informed of their relative admissions probabilities in the
sciences and non-sciences.

Professor Peter Arcidiacono, Faculty Advisor

JEL Codes: I23, I28, J24, H75

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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 Impact of Collegiate Athletic Success and Scandals on Admissions Applications

By William J. Battle-McDonald

This paper examines how the quantity and quality of admissions applications to Division 1 colleges and universities were affected by two non-academic factors: (1) performance of a school’s men’s basketball and football teams; and (2) scandals associated with these athletic programs. Admissions data from 2001 – 2017 were compared to team performance during their football and basketball seasons in order to understand how these non-academic factors contribute to an individual’s decisions to apply for admission. A multivariate linear regression model with school and year fixed effects supported the hypothesis that athletic success positively affects the quantity of applications, increasing them by up to 3% in basketball and 11% in football in the following application period. Seasonal football success was also shown to have negative impacts on the distribution of standardized testing scores of future applicant classes, however these scores were shown to increase when a team played their best season in five or more years. Additional analysis of the effects of athletic program scandals reveals a significant negative effect on the number of applications received, although a deep dive into a few of the most prominent scandals suggests that the benefits associated with violating NCAA rules may, under the right circumstances, be well worth the risk.

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Advisor: Dr. James Roberts | JEL Codes: I23, J24, L82, L83, Z2

Analyzing Student and Family-Level Effects on a Family’s Contributions to Fund a College Education

By Justin T. Rosenblum and John H. Zipf

We investigate the efficiency of the current financial aid system for prospective college students. The Free Application for Federal Student Aid (FAFSA) form reviews a family’s financial information and universities review a student’s academic prowess, but neither fully examines students and their family’s qualitative factors such as parents’ highest education level or intended major. Using the National Center for Education Statistics’ National Postsecondary Student Aid Study, we investigate academic, financial, and familial characteristics to determine if they impact a student’s level of private loans relative to their total cost of attendance. We find that students with parents who did not receive a college degree are adversely affected by the current financial aid system. In particular, these students take out a greater amount of private loans relative to their total cost of attendance all else equal. Our finding has wider policy implications; changing the current financial aid system to assist disadvantaged students could help reduce intergenerational education inequalities. In addition, colleges could reach a broader range of students by helping
the students that currently struggle the most to pay tuition.

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Advisors: Michelle Connolly, Hugh Macartney and Kent Kimbrough | JEL Codes: I2, I22, I23

The Impact of Greek Affiliation on Grades and Course Selection

By Andrew De Donato

We seek to understand how affiliating with a Greek organization impacts both grades and course selection. This research provides a novel addition to the literature due to a unique situation at the sample university, in that the first opportunity for freshmen to join Greek organizations occurs in the spring semester rather than the fall, as is more common. This situation allows us to control for otherwise unobserved characteristics that may be common to those who affiliate with Greek organizations. For men, joining a Greek organization is associated with a .07 point decrease in the grade received for an average class, while, for women, it is associated with an increase of .02 points in the fall semester and a decrease of .06 points in the spring semester. Joining a Greek organization is also associated with a decrease in the difficulty of selected courses, such that the average course selected provides grades that are .03 points higher than the average course, controlling for enrolled student characteristics.

Honors Thesis

Advisor: Michelle Connolly, Peter Arcidiacon | JEL Codes: I, I21, I23, I24 | Tagged: Course Selection, Fraternity, GPA, Grades, Greek, Sorority

Federal and Industrial Funded Research Expenditures and University Technology Transfer licensing

By Trent Chiang

In this paper I relate the numbers of university licenses and options to both university research characteristics and research expenditures from federal government or industrial sources. I apply the polynomial distributed lag model for unbalanced panel data to understand the effects of research expenditures from different sources on licensing activity. We find evidence suggesting both federal and industrial funded research expenditures take 2-3 years from lab to licenses while federal expenditures have higher long-term dynamic effect. Break down licenses by different types of partners, we found that federal expenditures have highest effect with small companies and licenses generating high income. Further research is necessary to analyze the reason for such difference.

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Advisor: David Ridley, Henry Grabowski | JEL Codes: I23, L31, O31, O32, O38 | Tagged: Innovation, Research Expenditures, Science Policy, Technology Transfer

Questions?

Undergraduate Program Assistant
Matthew Eggleston
dus_asst@econ.duke.edu

Director of the Honors Program
Michelle P. Connolly
michelle.connolly@duke.edu