Participation in higher education : The role of cost and return expectations

This study applies to German data a model in which the decision to attend higher education depends on the ratio of marginal cost and marginal return expected from higher education. If this ratio is below a certain threshold, the individual will choose to participate in higher education. In a simulation exercise, the impact of selected variables on this threshold, and thus on the participation probability, is quantified. The results suggests the presence of financial constraints binding participation in higher education and that the participation decision responds to some extent to return expectations in terms of labour market outcome and to financial incentives such as student support.