NBER Reporter: Summer 2001

Higher Education

The NBER's Working Group on Higher Education, directed by Charles T. Clotfelter of Duke University, met in Cambridge on May 10 to discuss these papers:

Charles T. Clotfelter and Jacob L. Vigdor, Duke University, "Retaking the SAT"

Discussant: Christopher Avery, Harvard University

A. Abigail Payne, University of Illinois, "The Impact of State Governance Structures on Research Productivity at Public Universities"

Discussant: Michael Rothschild, NBER and Princeton University

Orley C. Ashenfelter, NBER and Princeton University, and David Card, NBER and University of California, Berkeley,

"How Did the Elimination of Mandatory Retirement Affect Faculty Retirement?"

Discussant: Ronald G. Ehrenberg, NBER and Cornell University

Peter Arcidiacono, Duke University, "Affirmative Action in Higher Education: How do Admission and Financial Aid Rules Affect Future Earnings?""

Discussant: Jill Constantine, Williams College

Sarah Turner, University of Virginia, and John Bound, NBER and University of Michigan,

"Closing the Gap or Widening the Divide: The Effects of the G.I. Bill and World War II on the Educational Outcomes of Black Americans"

Discussant: Susan Dynarski, NBER and MIT

Jennifer Ma, TIAA-CREF Institute, "The Differential Impact of College Cost on the Enrollment of Students from the Different Socioeconomic Backgrounds"

Discussant: Bruce Sacerdote, NBER and Dartmouth College

Clotfelter and Vigdor analyze a college applicant's decision to retake the SAT. Nationwide, roughly half the college applicants take the test more than once; among applicants to selective institutions, the frequency of retaking is significantly higher. This analysis uses data on applicants to three selective universities and a numerical simulation in which the process of receiving draws from a distribution of possible test scores is likened to an optimal search problem. The authors show that the most common test score ranking policy, which focuses on the highest of all submitted scores, provides large incentives to retake the test, since applicants always expect to receive positive benefits upon retaking. Current policy places certain applicants at a disadvantage: those with high costs of taking the test, low values attached to college admission, or "pessimistic" prior beliefs regarding their own ability. These disadvantaged applicants are disproportionately likely to come from low-income African-American families.

Payne examines the role of state governing boards on research productivity at public universities in the United States. Using a panel dataset that covers 1982 to 1998, she explores the relationship between research funding and research activities for three types of governance structures: centralized governing board; a coordinating board with some regulatory authority; and a decentralized coordinating board or planning agency. This paper demonstrates, on average, that fewer articles are published and there are fewer citations per article published with an additional dollar of research funding at universities in states with a highly centralized state governing board. The highest level of productivity with respect to publications is seen at universities in states with a coordinating board with regulatory authority over program approval and some oversight of universities' budgets. Additional research funding increases citations per article at these universities, on average, by between 1.5 and two times the amount for universities in states with a decentralized governance structure. These results suggest that while centralized oversight reduces productivity, decentralization may not be the solution.

Ashenfelter and Card use information on retirement flows from 1986-96 for older faculty at a large sample of four year colleges and universities to measure the effect of the elimination of mandatory retirement. Comparisons of retirement rates before and after 1994, when most institutions were forced to stop mandatory retirement, suggest that the abolition of compulsory retirement led to a dramatic drop in retirement rates at ages 70 and 71. Comparisons of retirement rates in the early 1990s between schools that were still enforcing mandatory retirement and those that were forced to stop by state laws lead to the same conclusion. In the era of mandatory retirement, fewer than 10 percent of 70-year-old faculty were still teaching two years later. After the elimination of mandatory retirement, this fraction has risen to 50 percent. These findings suggest that most U.S. colleges and universities will experience a significant rise in the fraction of older faculty in the coming years.

Arcidiacono addresses how changing the admission and financial aid rules at colleges can affect future earnings. He estimates a model that includes decisions by individuals about where to submit applications, which school to attend, and what field to study, as well as decisions by schools as to which students to accept and how much financial aid to offer. Throughout, individuals have rational expectations and maximize the present value of lifetime utility, recognizing the dependence of future utility on choices made today. By estimating the whole process, it is possible to see how the decision-making behavior, and the corresponding future earnings associated with these decisions, would be affected by changing the admission and financial aid rules.

Turner and Bound ask whether black Americans responded similarly to white men to the G.I. Bill and World War II. There are good reasons to believe that the effects of the G.I. Bill may have differed for black Americans because of differential returns to education in the labor market and differences in opportunities at educational institutions, with men in the South facing explicit segregation in educational institutions. The question of whether black veterans from segregated and unsegregated parts of the country demonstrated similar educational adjustments is significant for the overall evaluation of the G.I. Bill and for the contemporary policy debate on the effectiveness of federally sponsored aid to education. The empirical evidence suggests that World War II and the availability of G.I. benefits had a substantial and positive impact on the educational attainment of those likely to have access to colleges and universities outside the South. However, for those black veterans more likely to be limited to the South in their collegiate choices, the G.I. Bill had little effect on educational outcomes, resulting in the exacerbation of the economic and educational differences between blacks and whites.

While numerous studies have estimated the impact of college cost on enrollment rates, very few have used the duration of enrollment or completed schooling as an outcome measure. Ma examines the impact of public in-state tuition cost and state grant aid on the enrollment rates and duration of enrollment, paying particular attention to the differential impact of cost on students from different income and race groups. Her results suggest that public in-state two-year tuition has a strong impact on enrollment rates while public in-state four-year tuition generally has a negligible impact on enrollment rates. Further, the enrollment rates of low-income and middle-income students are more sensitive to public two-year tuition costs than the enrollment rates of high-income students. The enrollment rate of black students is more sensitive to tuition cost than that of white and Hispanic students. Further, the enrollment rates of middle-income students and Hispanic students appear to be the most sensitive to state grant aid. Results from enrollment duration models suggest that tuition cost and financial aid in general have a small or negligible impact on the duration of enrollment. This is consistent with the argument that there is a barrier to college entry. Once students cross that barrier, tuition does not seem to matter much to completed schooling.

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