Academic Admissions Standards: Implications For Output, Distribution, And Mobility

We examine the trade-offs implicit in academic admissions standards when students are charged cost-based tuition and offered loans that remove liquidity constraints. Lowering entry requirements while holding graduation requirements fixed increases aggregate output and promotes a more equal distribution of wages, but reduces relative income mobility and diminishes the scope for affirmative action. Lowering admissions standards while raising graduation requirements, so that the number of graduates remains constant, has little direct effect on output, distribution, or mobility, but again reduces the scope for affirmative action. Income-based affirmative action offers a better trade-off between output and relative mobility than income-neutral admissions. (JEL: D31, H42, I23, I28, J24) Copyright (c) 2005 by the European Economic Association.