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Small Differences That Matter: Mistakes in Applying to College

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  • Amanda Pallais

Abstract

In 1997, the ACT increased the number of free score reports it provided to students from three to four, maintaining a $6 marginal cost for each additional report. In response to this $6 cost change, ACT-takers sent many more score reports and applications relative to SAT-takers. They widened the range of colleges they sent scores to, and low-income ACT-takers attended more-selective colleges. Back-of-the-envelope calculations suggest that the policy substantially increased low-income students' expected earnings. This sizable behavioral change in response to such a small cost change suggests that in this setting, small policy perturbations can have large effects on welfare.

Suggested Citation

  • Amanda Pallais, 2015. "Small Differences That Matter: Mistakes in Applying to College," Journal of Labor Economics, University of Chicago Press, vol. 33(2), pages 493-520.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/678520
    DOI: 10.1086/678520
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