Institutions, Incentives, and Barriers: Three Essays on the Economics of Education

Abstract

A central question in the economics of education is how to effectively promote individual investment in human capital. As governments design policies that create incentives and disincentives for this investment, individuals adjust their behavior accordingly. In this dissertation, I utilize large-scale natural experiments and administrative data to study the effectiveness of these policy levers. I investigate how students respond to targeted incentives through dynamic merit-based financial aid, the expansion of expected returns via broader labor market opportunities, and the strict disincentives imposed by high school exit exams that limit further educational attainment. The first essay, "The Dynamics of Financial Aid Tournaments," examines how merit-based aid affects student success when resources are regularly reassigned through academic competition. Using a dynamic regression discontinuity design, I identify a powerful "crowding-in" effect where winning aid today endogenously increases the probability of receiving aid in the future, demonstrating that early institutional support can set students on a durably different academic trajectory. The second essay, "The Prospect of Mobility and Human Capital Formation," studies how the removal of barriers to labor mobility impacts domestic human capital investment. Leveraging the 2004 European Union enlargement, I find that gaining access to a higher-wage labor market raised the expected returns to education, leading to a significant increase in tertiary attainment. The results suggest that free movement of labor can catalyze human capital creation, generating a net brain gain for the origin country. The third essay, "Administrative Barriers to Higher Education," explores the option value of a high school diploma in an open-enrollment system. I exploit an exceptionally low passing threshold for high school exit exams to show that barely passing the exam increases immediate tertiary enrollment by 21.1 percentage points, particularly for female students. These findings suggest that administrative barriers can disproportionately exclude motivated students with high latent demand for higher education.