POLICY IMPLICATIONS FOR OVERMATCH

Author:

Rakoczy, Stephen J

Area of Honors:

Economics

Degree:

Bachelor of Science

Document Type:

Thesis

Thesis Supervisors:

Russell Wade Cooper, Thesis Supervisor
Dr. Russell Paul Chuderewicz, Thesis Honors Advisor

Keywords:

Overmatch
education
undermatch
college
policy
tuition
returns to education
college decision
OECD
PIAAC

Abstract:

The purpose of this paper is to determine how public policy influences overmatch, wherein low ability individuals attend college. Overmatch is not defined as bad but rather unexpected, given the lower payoff of attending college for a low ability individual. Low ability individuals might be more inclined to attend college if public policy eases the cost of college, whether through grants or scholarships, student loans, institutional subsidies, or the creation of lower cost public colleges, which could all increase overmatch. Even though college attendance looks more attractive, lower ability individuals could face greater employment difficulty in the future compared to high ability individuals and may have been better off financially not attending college. The paper uses previous estimates of overmatch across 21 OECD countries along with several public policy variables to perform regressions and determine if there is a connection. The most significant variables in regards to overmatch are what percent of college costs are public rather than private, which captured the effects of all the different subsidies, and what percentage of students attend public universities. Both have quadratic relationships with the estimated overmatch variable, wherein at lower values overmatch falls and at higher values overmatch increases. This relationship holds even after removing Japan and Korea from the regressions, which may have been skewing the data. Even though higher levels of these variables are correlated with higher overmatch, there is evidence they could potentially decrease undermatch, wherein high ability individuals do not attend college. This is the tradeoff a nation faces when it considers how involved it becomes in higher education.