Why are high ability individuals from poor backgrounds under-represented at university?
Additional Document Info
We analyse data in which individuals from low socio-economic status (SES)
backgrounds have lower university participation rates than those from higher SES backgrounds.
Our focus is on the role played by credit constraints in explaining these
different participation rates. We propose a multi-stage model of education where
university participation is contingent on ability to pay and high school academic
performance, which depends on family SES and innate student ability. We find no evidence
that credit constraints deter high achieving students from attending university in
Australia, a country with an income contingent loan scheme for higher education tuition
fees. We do, however, find that how students convert their earlier school performance
into the scores on which university entrance is based is contingent on their SES. That
is, for students of similar ability, those from higher SES backgrounds are more likely
to obtain university entrance scores and achieve higher scores if they do. Hence, policy
interventions that rectify the credit constraint problem that faces individuals at the
time they make university entrance decisions are not sufficient to equalize university
participation across social groups.