The effects of merit-based financial aid on drinking in college

Abstract

We study the effect of state-level merit aid programs (such as Georgia's HOPE scholarship) on alcohol consumption among college students. Such programs have the potential to affect drinking through a combination of channels – such as raising students’ disposable income and increasing the incentive to maintain a high GPA – that could theoretically raise or lower alcohol use. We find that the presence of a merit-aid program in one's state generally leads to an overall increase in (heavy) drinking. This effect is concentrated among men, students with lower parental education, older students, and students with high college GPA's. Our findings are robust to several alternative empirical specifications including event-study analyses by year of program adoption. Furthermore, no difference in high-school drinking is observed for students attending college in states with merit-aid programs.