samlet årgang - Økonomisk Institut - Københavns Universitet

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NATIONALØKONOMISK TIDSSKRIFT 2005. NR. 1
educational system could potentially also affect time to degree completion although
there is unlikely to exist much variation in the universal financial aid packages (SU)
available to Danish students. Two variables capture financial aid generosity: GRANT,
which is the individual's (annual) grant entitlement, obtained from SU publications,
which varies by age (threshold 18), residential arrangements (living with parents or
not) and year, and WINDOW, an indicator of being in the eligible window to receive
financial aid, which for most years and for most individuals in our sample, is a period
of 70 months.
With regard to student ability variables, as student test score information was
unavailable in the 0.5% sample, we proxy student ability by type of high school degree
obtained, i.e. a regular high school degree, a high school equivalent degree or a degree
from a technical high school. Ideally, we would like to have for example verbal and
math ability variables which previous studies have shown to be highly correlated with
performance in higher-educational programs, see for example Albæk (2002), for Denmark,
but these data are unavailable in the 0.5% sample. Of course, a more fundamental
control for ability is made by allowing for the existence of unobserved heterogeneity
using a three-point discrete distribution.
Finally, labour market variables that are assumed to significantly affect education
completion times are the individual's real annual labour market earnings in kroner, real
average (log) wages of workers who have completed the same degree and average
weekly unemployment degrees of similar degree holders. 10 While information on the
individual’s own labour market earnings is available in the 0.5% sample data, the last
two are aggregates created from a 2% sample of the population (Danish IDA data), for
each type of degree (short, medium, long), for each year in the sample period which
are merged to our estimation sample by educational type and year. In addition, cohort
size effects are captured by year of high school graduation variable, which varies by
definition from 1980-1988.
Background variables such as gender, type of high school degree, year of high
school graduation and taking a sabbatical year after high school are time invariant.
The time-varying covariates are cohabitation status, presence of small children, the
student’s real annual labour market earnings, real average wage of same degree holders,
average unemployment degree of same degree holders, type of education (short,
medium or long), time between programs, first program or not and the financial aid
variables.
10. In Denmark, unemployment is typically recorded as a degree (0-1000) indicating the fraction of the year
that the individual has been unemployed.