Enrollment and success in higher education [Elektronische Ressource] : structural estimation and simulation evidence for Germany / vorgelegt von Daniela Glocker
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Enrollment and success in higher education [Elektronische Ressource] : structural estimation and simulation evidence for Germany / vorgelegt von Daniela Glocker

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Enrollment and Successin Higher EducationStructural Estimation andSimulation Evidence for GermanyI N A U G U R A L - D I S S E R T A T I O Nzur Erlangung des Grades einesDoktors der Wirtschaftswissenschaft(doctor rerum politicarum)am Fachbereich Wirtschaftswissenschaftder Freien Universit¨at Berlinvorgelegt vonDipl.-Vw. Daniela GlockerBerlin, 2010Erstgutachter: Prof. Viktor Steiner, Freie Universitat Berlin¨Zweitgutachter: Prof. Irwin Collier, Freie Universitat Berlin¨Tag der Disputation: 25.10.2010PrefaceI had the opportunity to write my doctoral thesis as a research associate at the GermanInstitute for Economic Research (DIW Berlin) in the Public Economics Department. Ibene ted immensely from working in this stimulating and dynamic environment.Firstofall,IwouldliketothankmyprinciplesupervisorViktorSteinerforhisguidanceand his support. During every stage of my dissertation project, he took the time toextensively discuss my work and gave me helpful comments and advice. I am also gratefultomysecondsupervisorIrwinCollierforhisinterestinmytopicandagreeingtosupervisethis thesis.Chapter three and parts of chapter four of my dissertation thesis are based on jointwork. I thank my co-author Frank Fossen for the fruitful and enjoyable collaboration.I learned a lot from him and this project, which also bene ted my work outside ourcollaboration.

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Published 01 January 2010
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Enrollment and Success
in Higher Education
Structural Estimation and
Simulation Evidence for Germany
I N A U G U R A L - D I S S E R T A T I O N
zur Erlangung des Grades eines
Doktors der Wirtschaftswissenschaft
(doctor rerum politicarum)
am Fachbereich Wirtschaftswissenschaft
der Freien Universit¨at Berlin
vorgelegt von
Dipl.-Vw. Daniela Glocker
Berlin, 2010Erstgutachter: Prof. Viktor Steiner, Freie Universitat Berlin¨
Zweitgutachter: Prof. Irwin Collier, Freie Universitat Berlin¨
Tag der Disputation: 25.10.2010Preface
I had the opportunity to write my doctoral thesis as a research associate at the German
Institute for Economic Research (DIW Berlin) in the Public Economics Department. I
bene ted immensely from working in this stimulating and dynamic environment.
Firstofall,IwouldliketothankmyprinciplesupervisorViktorSteinerforhisguidance
and his support. During every stage of my dissertation project, he took the time to
extensively discuss my work and gave me helpful comments and advice. I am also grateful
tomysecondsupervisorIrwinCollierforhisinterestinmytopicandagreeingtosupervise
this thesis.
Chapter three and parts of chapter four of my dissertation thesis are based on joint
work. I thank my co-author Frank Fossen for the fruitful and enjoyable collaboration.
I learned a lot from him and this project, which also bene ted my work outside our
collaboration.
I am grateful to my colleagues and friends at the DIW Berlin for creating a moti-
vating, supportive and enjoyable working atmosphere. I thank my o cemate Johannes
Geyer for econometric advice as well as sharing insights on tricky LaTeX and Stata ques-
tions, Katharina Wrohlich for helpful discussions about BAfoeG and Peter Haan for ad-
vice on Stata maximum likelihood programming. I also thank Stefan Bach, Hermann
Buslei, Nadja Dwenger, Kai-Uwe Mul ler, Michal Myck, Richard Ochmann, Pia Ratten-
huber, Davud Rostam-Afschar, Nicole Scheremet, Erika Schulz, Martin Simmler, Natasha
Volodina, FlorianWalch, AnneZimmer, aswellastheothercolleaguesattheDIWBerlin.
Being a member of the Graduate-Center at the DIW Berlin, I had the chance to
share my thesis chapters in all stages of development with people experiencing the same
challenges I had to face: I would like to thank especially Catherine Mul ler and Eva Berger
for their open door policy, sharing ideas, advice and co ee. Furthermore, I thank Frauke
Braun, Astrid Cullmann, Burcu Erdogan, Marc Vothknecht and Nicolas Ziebarth.
Writing this thesis, I experienced up and downs. I was however always sure to nd
support and encouragement in my family and friends for which I am grateful. I especially
iii
thank my parents Elisabeth and Herbert Glocker, as well as my brothers Andreas and
Manuel Glocker for their unconditional support and their interest in my work. Experienc-
ing a phase of stagnation, I was always sure to nd distraction in my little niece, Isabel
Glocker, which opened my mind for new approaches and gave me new strength to con-
tinue this thesis. Most importantly, I thank Alexander Lembcke for critically discussing
my ideas and approaches, as well as constructively proof-reading my thesis at all stages.
Throughout the whole time, I was sure of his patient encouragement and support, for
which I am deeply grateful.
Finally I would like to thank the Deutsche Forschungsgemeinschaft (DFG, German
Research Foundation) who nancially supported my thesis as part of the project \Poli-
tische Okonomie dezentraler Bildungs nanzierung { Theoretische Analyse und empirische
Anwendung fur Deutschland (STE 681/6-2)".Contents
Preface
1 Introduction 1
1.1 Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Contributions and Main Findings of the Thesis . . . . . . . . . . . . 6
2 Higher Education in Germany 11
2.1 Institutional Features . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.1 Federal Government . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.2 Federal States . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2 Developments in Germany . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2.1 Enrollment and Graduation rates . . . . . . . . . . . . . . . . 17
2.2.2 Returns to Education . . . . . . . . . . . . . . . . . . . . . . . 21
3 Structural University Enrollment Model 25
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.3 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.4 Estimation of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.4.1 Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.4.2 Estimation of Expected Wages . . . . . . . . . . . . . . . . . . 37
iiiiv Contents
3.4.3 Estimation of Variance of Wages . . . . . . . . . . . . . . . . 39
3.4.4 Forecasting Wage Profiles . . . . . . . . . . . . . . . . . . . . 39
3.4.5 Microsimulation Model of Income Taxation . . . . . . . . . . . 40
3.5 Results of Enrollment Model . . . . . . . . . . . . . . . . . . . . . . . 41
3.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.7 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.7.A Technical Note . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.7.B Tables and Figures . . . . . . . . . . . . . . . . . . . . . . . . 50
3.7.C Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . 58
4 Simulations of higher education nancing schemes and taxation
policies 63
4.1 Financing Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.1.2 Financing Schemes for Higher Education . . . . . . . . . . . . 65
4.1.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.1.4 Conclusion and policy implications . . . . . . . . . . . . . . . 82
4.2 Taxation Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
4.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
4.2.2 Simulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
4.2.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
4.2.4 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
4.3 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
4.3.A Additional Tables . . . . . . . . . . . . . . . . . . . . . . . . . 91Contents v
5 The E ect of Student Aid on the Duration of Study 93
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
5.2 Theoretical Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . 96
5.3 Empirical Methodology . . . . . . . . . . . . . . . . . . . . . . . . . 97
5.3.1 Model Specification . . . . . . . . . . . . . . . . . . . . . . . 97
5.3.2 Data and Variables . . . . . . . . . . . . . . . . . . . . . . . 100
5.4 Estimation Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
5.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
5.6 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
5.6.A Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
5.6.B Estimation Results . . . . . . . . . . . . . . . . . . . . . . . . 114
5.6.C Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . 116
6 Conclusion 121
6.1 Main Findings and Policy Implications . . . . . . . . . . . . . . . . . 121
6.2 Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
List of tables 127
List of gures 129
List of abbreviations 131
Bibliography 133
German summary 143