Post-secondary funding and the educational attainment of indigenous students

Abstract

This paper uses cutbacks to a post-secondary funding program for Indigenous peoples in Canada to understand how changes in the costs of higher education affect the educational attainment and labour market outcomes of Indigenous groups. I exploit exogenous variation in exposure to student aid across cohorts and ethnicities to show that increasing the costs of post-secondary education not only affects post-secondary attainment but can also lead to a sizable decrease in high school graduation rates. After reductions in targeted student aid in the late 1980s, high school graduation rates declined by five percentage points on Indian reserves. I suggest that this finding is consistent with a model of human capital acquisition in which the return to a high school degree is low. In this framework, some students complete high school in order to attend a post-secondary institution. When post-secondary education is no longer affordable, some students may no longer find it worthwhile to complete high school. In the long-run, the program cutbacks had lasting adverse effects on labour supply.