Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222122
Authors: 
Colas, Mark
Findeisen, Sebastian
Sachs, Dominik
Year of Publication: 
2019
Series/Report no.: 
Discussion Paper No. 225
Abstract: 
We study the optimal design of student financial aid as a function of parental income. We derive optimal financial aid formulas in a general model. For a simple model version, we derive mild conditions on primitives under which poorer students receive more aid even without distributional concerns. We quantitatively extend this result to an empirical model of selection into college for the United States that comprises multidimensional heterogeneity, endogenous parental transfers, dropout, labor supply in college, and uncertain returns. Optimal financial aid is strongly declining in parental income even without distributional concerns. Equity and efficiency go hand in hand.
Subjects: 
Financial Aid
College Subsidies
Optimal Taxation
Inequality
JEL: 
H21
H23
I22
I24
I28
Document Type: 
Working Paper

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