Parental Job Loss and Application Decisions in Finnish Post-Secondary Education

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Volume Title
School of Business | Master's thesis
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Date
2017
Department
Taloustieteen laitos
Major/Subject
Mcode
Degree programme
Economics
Language
en
Pages
29
Series
Abstract
I investigate the causal impact of family income on post-secondary school application decisions. In the Finnish education system, there are no tuition fees and no application costs, but the way the new students are selected to universities and polytechnics may still generate inequality among the applicants from different family backgrounds. Applicants apply directly to specific major programs and schools, and are then evaluated in entry examinations that measure how well they have mastered the predetermined exam materials. Typically, learning these materials is time consuming and students can only apply to a few major programs per application round. At the same time, the selection thresholds depend on the exam performance of all competing applicants. Consequently, it can be difficult for the individuals to evaluate their chances to be selected especially to the popular programs. The uncertainty related to the selection thresholds combined with the limited number of applications introduces a strategic component to application decisions. Students in the low-income families do not have the same resources to cover the costs of spending a gap year and, therefore, they may have to balance between their true education preferences and the ability to handle the risk of rejection. To study the application decisions, I use information on the Finnish high school students that have graduated between the years 2004 and 2013. First, I document that there is a socioeconomic gradient in application behavior. Compared to equally skilled peers in the high-income families, students in the low-income families apply less to universities and more to polytechnics, send fewer applications and choose less selective major programs. Second, in order to isolate the causal impact of family income on the students’ application decisions, I exploit information on parental job losses due to plant closures. I find that parental job losses have no impact on the likelihood of high school graduates applying to post-secondary education. However, the affected graduates change their application strategies by sending fewer applications and by choosing less selective major programs.
Description
Thesis advisor
Bagues, Manuel
Keywords
economics, post-secondary education, application strategies, parental job loss
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