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 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 make the transition into post-secondary education. CAPS administered a baseline literacy and numeracy exam, allowing us to at least partially control for scholastic ability during secondary school. Our results indicate that baseline income and ability 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, but the effect of income continues to be large. The results suggest that credit constraints may be an important factor explaining the large racial and income differentials in post-secondary enrollment.