Credit Constraints and the Racial Gap in Post-Secondary Education in South Africa

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 14.06.2012, 12:15 - 13:30


Presentation by 

David Lam (University of Michigan)


This paper analyzes the impact of baseline household income and scholastic ability on post-secondary enrollment in South Africa. Using longitudinal data from the Cape Area Panel Study (CAPS), we analyze the large racial gaps in the proportion of high school graduates who enroll in university and other forms of post-secondary education. Our results indicate that baseline income and ability (measured by performance on the grade 12 matriculation exam) are strong predictors of post-secondary enrollment and statistically account for all of the black-white difference in enrollment. Controlling for parental education and baseline scholastic ability eliminates the estimated impact of household income on university enrollment, though it does not eliminate the impact of income on other forms of post-secondary enrollment. Two measures of short-term income variability do not have statistically significant effects on enrollment. The results suggest that credit constraints do not appear to be important in explaining university enrollment, arguably the most important determinant of later labor market earnings. Credit constraints may play a role in other types of post-secondary education, however, programs that we estimate to have large labor market returns.

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