Need-based financing policies, college decision-making, and labor market behavior: Evidence from Jamaica

Abstract

Designing an effective framework for financing higher education is a key objective of policymakers in developed and developing countries. While we have a good understanding of how college financing options affect students' college outcomes in developed countries, less is known about the impact of these programs in developing countries. In this paper, I employ several quasi-experimental designs and novel administrative data from Jamaica to estimate the effect of need-based grants and student loan funding on students' academic achievement and labor market outcomes. The results indicate that the students who benefited from either program had a higher GPA, graduated at higher rates, and were more likely to remain in college beyond their second year. While both programs induce treated students to reduce their engagement in the labor market during college, I find that each program had an opposing impact on students’ earnings in the early years after their expected graduation date.