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Liquidity constraints and free post-secondary education. Evidence from Colombia

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  • Luis Fernando Gamboa, Jaime Millan-Quijano

Abstract

This paper provides new evidence on the importance of short-run liquidity constraints in a tuition-free post- secondary education setting. We exploit two sources of exogenous variation in enrollment in free tertiary education to disentangle the role played by liquidity constraints, and show that eligibility for financial aid increases enrollment by 11.9 percentage points. We show that individuals with larger returns to education are more affected by the availability of grants. In contrast, when variation in enrollment is not derived from changes in the relative cost of education, compliers to such variation are not necessarily individuals with large returns to education. Our results support the hypothesis that low-income youths encounter liquidity constraints, even when entering free tertiary education.

Suggested Citation

  • Luis Fernando Gamboa, Jaime Millan-Quijano, 2021. "Liquidity constraints and free post-secondary education. Evidence from Colombia," NCID Working Papers 02/2021, Navarra Center for International Development, University of Navarra.
    • Handle: RePEc:nva:unnvaa:wp02-2021
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    File URL: http://ncid.unav.edu/en/research/working-papers/wp022021
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    More about this item

    Keywords

    Liquidity constraints; tertiary education; regression discontinuity.;
    All these keywords.

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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