Events

Dr. Irina Popova
Postdoctoral Researcher
University of Bonn

We evaluate the aggregate, distributional and welfare consequences of alternative government
education policies to encourage college completion such as making college free and improving
funding for public schooling. To do so, we construct a general equilibrium overlapping
generations model with intergenerational linkages, a higher education choice as well as a multistage human capital production process during childhood and adolescence with parental and
government schooling investments. The model features rich cross-sectional heterogeneity,
distinguishes between single and married parents, and is disciplined by US household survey data
on income, wealth, education and time use. Studying the transitions induced by unexpected
policy reforms we show that the “free college” and the “better schools” reform generate
significant welfare gains, which take time to materialize and are lower in general than in partial
equilibrium. It is optimal to combine both reforms: tuition subsidies make college affordable even
for children from poorer parental backgrounds and better schools increase human capital thereby
reducing dropout risk.