NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Cash-on-Hand & College Enrollment: Evidence from Population Tax Data and Policy Nonlinearities

Dayanand S. Manoli, Nicholas Turner

NBER Working Paper No. 19836
Issued in January 2014
NBER Program(s):   CH   ED   LS   PE

In this paper, we estimate the causal effects of tax refunds (cash-on-hand) on college enrollment using population-level administrative data from United States income tax returns. We exploit plausibly exogenous variation in tax refunds around two kink points in the federal income tax code, including the first kink point in the Earned Income Tax Credit benefit schedule and the 15%-25% tax bracket kink point. Non-parametric graphical evidence suggests that differences in tax refunds across these tax kink points have meaningful effects on enrollment. Using a Regression Kink Design, our results indicate that a $1,000 increase in tax refunds received in the spring of the high school senior year increases college enrollment the next fall by roughly 2 to 3 percentage points. The magnitude of these effects, combined with less-than complete take-up of student aid, may be evidence that tax refunds relax credit constraints.

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Document Object Identifier (DOI): 10.3386/w19836

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