Credit constraints and the racial gap in post-secondary education in South Africa

This paper analyzes the impact of high school household income and scholastic ability on post-secondary enrollment in South Africa. Using longitudinal data from the Cape Area Panel Study (CAPS), we analyze the large racial gaps in the proportion of high school graduates who enroll in university and other forms of post-secondary education. Although there are enormous income differences between blacks and whites, and a strong relationship between income and post-secondary enrollment, we find that credit constraints are only a small contributor to the large racial gap in enrollment. Controlling for parental education and baseline scholastic ability (measured by a literacy and numeracy exam and performance on the grade 12 matriculation exam) reduces the estimated impact of household income on university enrollment, though there continues to be an effect at the top of the income distribution. We also find evidence of credit constraints on non-university forms of post-secondary enrollment. Counterfactual estimates indicate that if all South Africans had the incomes of the richest whites, African university enrollment would increase by 65%, even without changing parental education or high school academic achievement. The racial gap in university enrollment would narrow only slightly, however, as our results suggest that this gap in postsecondary enrollment results mainly from the large racial gap in high school academic achievement.