College cost and time to complete a degree: Evidence from tuition discontinuities. Review of Economics and Statistics forthcoming

Many students enrolled in academic programs around the world take longer to obtain a degree than the normal completion time while col-lege tuition is typically constant during the years of enrollment. In particular, it does not increase when a student remains in a program beyond the normal completion time. Using a Regression Discontinu-ity Design on data from Bocconi University in Italy, this paper shows that an increase of 1,000 euro in the continuation tuition, reduces the probability of late graduation by at least 6.1 percentage points with respect to a benchmark average probability of 80%. We conclude suggesting that an increase in continuation tuition is efficient when effort is suboptimally supplied, for instance in the presence of public subsidies to education, congestion externalities and/or peer effects