Academic Match and the Returns to For-Profit and Public Colleges

• In Event: Non-Traditional Postsecondary Pathways, Quality Signals, and Labor Market Returns

Abstract

Short vocational college programs can deliver substantial returns. Public subsidies for these programs are concentrated in community colleges (CCs). Yet CCs graduate only 30% of their students, while two-year for-profit alternatives graduate twice that share. Using administrative records covering all two-year for-profit and public college students in Texas, I use distance instruments to identify college sector effects among students on the for-profit/public margin. For-profits raise long-run completion rates by 32 percentage points, with effects largest among the weakest students. Yet for-profits’ more attainable pathways do not lead to less valuable degrees. A within-individual design shows that for-profit and CC degrees confer similar long-run returns. Expected returns at enrollment exhibit substantial match effects: academically weak students gain more from for-profits because of elevated dropout risk at CCs, while the strongest earn higher returns from CCs, partly due to the option value of academic and four-year pathways. I collect data on program-level course requirements, which show that for-profits require significantly less academic coursework, a plausible mechanism for match effects. Finally, I estimate the welfare effects of extending subsidies to for-profits. Accounting for fiscal savings on substitution out of CCs and increased tax revenues, I estimate marginal values of public funds in excess of 2.

Author

• Ryan Haygood, Yale University
  Presenting Author