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Tag Archives: higher education
Affirmative Action and Human Capital Accumulation: Evidence from Brazil Marcos Hirai Catao
by Marcos Hirai Catao
Abstract
In this study, I examine the effects of affirmative action (AA) policies on high school students’ incentives to invest in human capital, focusing on the Brazilian Quotas Law (QL). This law mandates that federal higher education institutions reserve half of their seats for students from public high schools. Utilizing administrative data on schooling, college enrollment, and performance on standardized tests, I observe an increase in test scores among private high school students who attend public colleges. This increase corresponds with the reduction in available non-reserved seats. Conversely, no significant change is observed in the performance of public school students, despite a substantial increase in reserved seats, indicating a potential behavioral response. To estimate the effects of the policy, I analyze variations in policy exposure across regions and cohorts using difference-in-differences methods, which predominantly yield precisely estimated null results. Finally, I discuss potential reconciliations of these, proposing avenues for further research to explain the discrepancies.
Professor Jason Baron, Faculty Advisor
Professor Duncan Thomas, Faculty Advisor
Professor Michelle Connolly, Faculty Advisor
JEL Codes: I2, I23, I24
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.
Advisors: Professor Curtis Taylor | JEL Codes: I2, I22, I23
Questions?
Undergraduate Program Assistant
Matthew Eggleston
dus_asst@econ.duke.edu
Director of the Honors Program
Michelle P. Connolly
michelle.connolly@duke.edu
