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Higher Education.

The NBER's Working Group on Higher Education met in Cambridge on April 30. The Higher Education Working Group examines aspects of the higher education industry, including admissions, financial aid, enrollment patterns, financing, cost structure, the research enterprise, and the role of teaching as well as public policies that affect colleges and universities. Group Director Charles T. Clotfelter, NBER and Duke University, organized the meeting at which these papers were discussed:

Marie C. Thursby, NBER and Georgia Institute of Technology; Jerry Thursby, Emory University; and Emmanuel Dechenaux, Purdue University, "Shirking, Shelving, and Sharing Risk: The Role of University License Contracts"

Discussants: Irwin Feller, Pennsylvania State University

Johanne Boisjoly, University of Quebec at Rimouski; Greg J. Duncan, Northwestern University; Michael Kremer, NBER and Harvard University; Dan M. Levy, Mathematica Policy Research; and Jacque Eccles, University of Michigan, "Empathy or Antipathy? The Impact of Diversity"

Discussant: Bruce Sacerdote, NBER and Dartmouth College

Peter Arcidiacono and Jacob L. Vigdor, Duke University, "Does the River Spill Out? Estimating the Economic Returns to Attending a Racially Diverse College"

Discussant: Ronald G. Ehrenberg, NBER and Cornell University

Susan Dynarski, NBER and Harvard University, "Who Benefits from the Education Saving Incentives? Income, Educational Expectations and the Value of the 529 and Coverdell"

Discussant: Sarah Turner, NBER and University of Virginia

Larry D. Singell, Jr., Glen R. Waddell, and Bradley R. Curs, University of Oregon, "Hope for the Pell? The Impact of Merit-Aid on Needy Students"

Discussant: Eric Bettinger, NBER and Case Western University

University, license contracts are more complex than the simple fixed fees and royalties typically examined by economists. Thursby, Thursby, and Dechenaux argue that these contracts are complex because of multiple distortions present when embryonic inventions are licensed. The authors test whether moral hazard, adverse selection, and risk aversion all play a role. Milestone payments can address inventor moral hazard without the inherent inefficiency in royalties; royalties are optimal only when the licensee is risk averse. The potential for a licensee to shelve inventions is one adverse selection problem that can be addressed by annual fees if the shelving is unintentional; milestones are needed if the firm licensed the invention with the intention of shelving it. The effectiveness of contracts in preventing shelving depends on the credibility of the threat to take the license back from the shelving firm. The authors use survey data and find that milestone payments help both to address inventor moral hazard and to share risk. Royalties are not used to address moral hazard, and their risk-sharing role is mitigated by difficulties in defining them for early-stage inventions. The authors further find that consulting is related to inventor moral hazard. Finally, their data support the use of annual payments for unintentional shelving.

Mixing across ethnic and class lines has the potential to either spur understanding or inflame tensions between groups. Boisjoly, Duncan, Kremer, Levy, and Eccles find that white students at a large state university who are randomly assigned African-American roommates in their first year are more likely to endorse affirmative action policies several years later. Whites randomly assigned black roommates also are more likely to say they have more personal contact with, and interact more comfortably with, members of minority groups. Whites assigned either black or low-income roommates are more likely to view a diverse student body as essential for a high-quality education. Further, students become less supportive of higher taxes for the wealthy when their assigned roommates are from high-income families, and they appear more likely to volunteer when their assigned roommates come from low-income families. Taken together, these results suggest that students become more empathetic with the social groups to which their roommates belong.

Arcidiacono and Vigdor evaluate the hypothesis that students receive tangible benefits from experiencing racial diversity in college. Using data on graduates of 30 selective universities, the authors find no significant link between racial composition and the post-graduation outcomes of typical white or Asian students. This result persists when they use major-level variation in racial composition with college and major fixed effects. While the results are consistent with the view that undergraduate diversity, is irrelevant to postcollegiate outcomes, the authors find suggestive evidence that the lack of a significant estimated return may reflect persistent exposure to diversity before and after college combined with diminishing returns.

Dynarski examines the incentives created by the 529 and Coverdell tax-advantaged savings accounts. She finds that the advantages of the 529 and Coverdell rise sharply with income, for three reasons. First, those with the highest marginal tax rates benefit the most from sheltering income, gaining most in both absolute and relative terms. Second, the tax penalties that are assessed on families whose children do not use their Coverdell accounts to pay for college hit some families harder than others. Strikingly, those in the top two tax brackets benefit more from non-educational use of a Coverdell than those in the bottom bracket gain from its educational use. Finally, the college financial aid system reduces aid for those families that have any financial assets, including an ESA or 529. Since the highest-income families are unaffected by this aid tax, this further intensifies the positive correlation between income and the advantages of the tax advantaged college savings accounts.

Prior empirical evidence finds that enrollment effects of merit-aid programs, such as the Georgia Hope Scholarship, are large and significant, whereas the effects of need-based aid programs such as the Pell Grant are modest and often insignificant. Singell, Waddell, and Curs use new panel data on Pell awards along with detailed institutional data from the National Center of Educational Statistics to examine whether the Georgia Hope Scholarship improves college access of needy students relative to students in other southern states. The authors show that large increases in merit aid improve college access of needy students and leverage Hope Scholarship funds with greater federal Pell assistance. Whereas most institution-specific increases in both Pell enrollment and funding are found for two-year and less-selective four-year institutions, the results also suggest that Pell students are not crowded out of more selective schools by Hope's intent to retain the best Georgia high-school students.
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Title Annotation:Bureau News
Publication:NBER Reporter
Article Type:Panel Discussion
Geographic Code:1USA
Date:Jun 22, 2004
Words:1012
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