Financial Aid and Social Mobility: Evidence from Colombia's Ser Pilo Paga

Juliana Londoño-Vélez, Assistant Professor of Economics, UCLA

Abstract: We study the effects of financial aid on human capital and social mobility. In 2014, Colombia implemented a nationwide financial aid program covering the tuition of four-year undergraduate programs at 33 "high-quality" universities. We estimate effects on educational and labor market outcomes realized seven years after high school completion. We leverage the program's discontinuous assignment rules based on test scores and household wealth using a regression discontinuity design and identify effects away from these discontinuities using difference-in-differences. There are four key results. First, financial aid has a long-lasting expansion of college access and quality, exposing students to colleges with high learning and earnings premia. Second, financial aid boosts social mobility by expanding college attainment and earnings, partly by raising students’ productivity. Third, financial aid slashes the wealth gaps in attainment, learning, and earnings among equally-achieving students. Fourth, these sizable benefits are not offset by corresponding losses for nonrecipients. As a result, financial aid improves both equity and efficiency. Thanks to financial aid, colleges act as "engines of social mobility" rather than as "bastions of privilege." (co-authored with Catherine Rodríguez, Fabio Sánchez, and Luis Esteban Álvarez)

Juliana Londoño-Vélez is an Assistant Professor of Economics at the University of California, Los Angeles, and a Faculty Research Fellow at the National Bureau of Economic Research. Her work primarily focuses on inequality and redistributive tax and transfer policies, with a special interest in developing countries. She received her Ph.D. in Economics from the University of California, Berkeley in 2019.