How Does Program of Study Affect Financial Outcomes? Regression Discontinuity Evidence from Denmark

Authors: Steffen Andersen, Philippe d’Astous, Jimmy Martìnez-Correa and Stephen H. Shore

Students who enroll in some universities and programs of study experience better financial outcomes than others. How much of these cross-program differences reflect selection versus causal effects? We exploit a discontinuity built into the admissions system at Danish universi-ties, providing quasi-random assignment of similar applicants to different programs. We then use Danish registry data to compare financial outcomes 10 years after enrollment in cases where the assignment scheme moves students from programs with worse outcomes to those with bet-ter outcomes, or vice versa. We find that enrolling in programs with higher-earning enrollees causes students to earn more, but that most cross-program differences in earnings reflect se-lection. Enrolling in programs whose enrollees subsequently have high-debt burdens (e.g., high non-mortgage interest payments) causes students to have higher debt burdens themselves, with much or even all of the cross-program differences in debt burdens reflecting causal effects and not selection. We cannot reject the hypothesis that cross-program differences in financial assets, mortgages, and neighborhood quality entirely reflect selection and not causal effects.

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