Olivia Birchall, WBS
As a researcher employing econometric methods, I enjoy working with data to gain insight about human phenomena. Although the statistical aspects of the work are satisfying, I am primarily interested in the understanding that can be gained about human behaviour and the mechanics of society. My research focuses on inequalities in education between young people from different family backgrounds. I believe that education is an important mechanism for social mobility and provides great opportunities; however, inequalities in educational outcomes commence at an early age and tend to increase. There is an important role for government policy and society at large in supporting families to provide opportunities for their children’s development. I hope that my research can contribute to this by adding to our understanding of the factors that influence and mediate these trends.
The gap in university participation between young people from poorer and richer families is substantial. Some estimates state that young people from the richest fifth of neighbourhoods are three times more likely to enrol than those from the poorest fifth (HEFCE, 2010). In the context of large increases in undergraduate fees and the prospect of increased debt levels, my research explores the effect of debt aversion and whether this is greater for young people from disadvantaged families, thus contributing to the gap in participation rates.
I firstly develop a theoretical model by extending the standard model of university participation in human capital theory. Debt aversion is introduced by focusing on the utility associated with asset levels, rather than overall lifetime earnings. In choosing to attend university or work straight after school, only one pathway includes a period of negative assets. A person’s evaluation of negative assets will therefore impact on their decision.
By applying econometric techniques such as logistic regression to a recent large scale longitudinal dataset (the LSYPE), I show that debt aversion has a negative impact on participation, with someone who believes that “owing money is always wrong” more than 10% less likely to attend university straight from school. Finally, by examining interaction effects and using sub-samples of the data, I find no clear evidence that the effects of debt aversion are more severe for poorer families. Debt aversion appears to affect the decision of young people from all family backgrounds.
The increase in fees will see an increase in indebtedness on graduation. This research predicts a reduction in participation rates as a response.