The effect of the availability of student credit on tuition: testing the Bennett hypothesis using evidence from a large-scale student loan program in Brazil

Mello, João M. P. De and Duarte, Isabela F. (2020) The effect of the availability of student credit on tuition: testing the Bennett hypothesis using evidence from a large-scale student loan program in Brazil. Economía, 20 (2). 179 - 222. ISSN 1529-7470

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Abstract

Exploring the expansion of FIES—a large student lending program in Brazil— we test whether eligibility for subsidized student lending causes tuition to rise, in accordance with the Bennett hypothesis. FIES rules created arguably exogenous variation in eligibility across different majors and higher education institutions, which we exploit in a difference-indifferences framework. Using unique information on tuition, we document that FIES eligibility caused tuition to rise. We then estimate a structural demand model to explore whether a reduction in the sensitivity of demand to price increases is one of the possible mechanisms behind this credit-driven tuition rise. Our results show that FIES expansion is associated with a reduction in the tuition elasticity of demand.

Item Type:	Article
Official URL:	https://economia.lse.ac.uk/
Additional Information:	© 2020 LACTEA
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance L Education > LB Theory and practice of education
JEL classification:	D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis I - Health, Education, and Welfare > I2 - Education > I22 - Educational Finance D - Microeconomics > D0 - General > D00 - General
Date Deposited:	03 Jul 2024 15:42
Last Modified:	24 Oct 2024 01:51
URI:	http://eprints.lse.ac.uk/id/eprint/123092

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