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Affirmative Action in Higher Education: How Do Admission and Financial Aid Rules Affect Future Earnings?

Peter Arcidiacono

Abstract

This paper addresses how changing the admission and financial aid rules at colleges affects future earnings. I estimate a structural model of the following decisions by individuals: where to submit applications, which school to attend, and what field to study. The model also includes decisions by schools as to which students to accept and how much financial aid to offer. Simulating how black educational choices would change were they to face the white admission and aid rules shows that race-based advantages had little effect on earnings. However, removing race-based advantages does affect black educational outcomes. In particular, removing advantages in admissions substantially decreases the number of black students at top-tier schools, while removing advantages in financial aid causes a decrease in the number of blacks who attend college.