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Better Way to Boost College Going?

January 16, 2007

Apart from the occasional libertarian or two, little public policy debate remains on the question of whether policy makers need to be doing more to get more Americans to attend and finish college. To the extent there is debate, it usually revolves around which kind of college aid should be emphasized: direct grants, loans, tax benefits, etc. Congressional Democrats and Republicans are scuffling over that issue right now.

But in a new working paper, available through the National Bureau of Economic Research, two economists suggest that if policy makers are really interested in increasing educational attainment by Americans, they should be focusing their attention (and their money) not on bolstering tuition aid but on improving the health of high school students.

In "Estimating Interdependence Between Health and Education in a Dynamic Model," Li Gan, an associate professor of economics at Texas A&M University, and Guan Gong, a professor at Shanghai University of Finance and Economics, argue that a health care subsidy paid directly to all high school graduates "would have a larger impact on educational attainment" than a direct college tuition subsidy.

The bulk of the economists' paper focuses on showing how interconnected individuals' health and education are -- better health begets greater educational attainment, and the better educated are healthier.

The study's bottom line finding, in the authors' words, is that "health plays an extremely important role in determining an individual’s educational attainment. On average, having been sick before the age of 21 decreases [an individual's average educational attainment] by 1.4 years."

To gauge the logical policy implications of their findings, the authors ran two experiments on a pool of 8,000 individuals aimed at assessing the impact of two possible subsidies: a $2,100 per year college tuition subsidy (available to all who attend college) and a $778 a year subsidy for health expenditures made for four years to all 16-year-olds who attend high school. The overall costs of the two subsidies were the same.

The researchers found that the college tuition subsidy, as one might expect, resulted in increased educational attainment, assets and other key attributes of the 8,000 people in the sample. The average highest schooling years completed increased by 0.42 years, from 13.39 to 13.81 years; the mean years in college grew by 0.35 years, from 1.85 to 2.20 years; and the mean value of assets at age 30 increased by 18 percent, from $19,134 to $22,608.

Not everyone gained equally. Of course, only those who attended college earned the tuition benefit. Healthy people -- those who had not experienced "at least one bout of sickness before age 21" -- gained more than those who had. And students considered to have "high ability" in school benefited more than those with "low ability."

Examining the effects of the health subsidy (which could include in-school health services, reimbursement of health expenses, etc., Gan said), the researchers found that it increased the average highest year of schooling by 0.53 years, 0.11 more than the college tuition subsidy did. The mean years spent in college grew by 0.44, 0.09 more than the college tuition subsidy. The mean assets at age 30 were almost identical to those produced by the tuition subsidy.

Yet the effects of the health subsidy are more broadly distributed, with sick people and those with lower skills benefiting, too, the researchers found.

That leads them to conclude: "A health expenditure subsidy conditional on high school attendance would have a larger impact on educational attainment than a direct college tuition subsidy. In particular, a direct college tuition subsidy will favor healthy individuals, especially those who are healthy and have low academic ability, while a high school health expenditure subsidy will favor sick individuals, especially those who are sick and have high academic ability."

Or, to put it more simply, as Gan said in an interview: "Spending on health actually helps education more than spending on tuition assistance itself."

 

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