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

David Lam, University of Michigan
Cally Ardington, University of Cape Town
Nicola Branson, University of Cape Town
Kendra Goostrey, University of Michigan
Murray Leibbrandt, University of Cape Town

This paper analyzes the impact of baseline 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 post-secondary education. Our results indicate that baseline income and ability (measured in CAPS’ literacy and numeracy evaluation) are strong predictors of post-secondary enrollment and statistically account for all of the black-white difference in enrollment. Controlling for parental schooling and baseline scholastic ability reduces the estimated impact of household income on enrollment, although the effect of income continues to be large. Two measures of short-term income variability do not have statistically significant effects on enrollment. While credit constraints may play a role, the evidence suggests that eliminating financing constraints would have only a modest impact on reducing the large racial gap in post-secondary enrollment.