Type | Working Paper - SALDRU Working Paper |
Title | A tale of two thresholds: A poverty dynamics approach to financial aid eligibility in South Africa |
Author(s) | |
Publication (Day/Month/Year) | 2023 |
Page numbers | 1-51 |
URL | https://custom.cvent.com/4E741122FD8B4A1B97E483EC8BB51CC4/files/event/192dc645bb4640f392198ab420fdad16/32816412d9724483a256d6271e1ce10d.pdf |
Abstract | Questions related to the sustainability of post-school education funding in South Africa, together with issues of expanding access and affordability have been fervently debated over the last decade. Stakeholders are currently grappling with funding the ‘missing middle’ – students who come from households whose income is too high for them to be eligible for financial aid, but for whom fee and accommodation costs remain unaffordable. If free education for all students is not viable, a funding instrument that differentiates students according to socioeconomic need may be relevant. Guided by the poverty dynamics literature, we argue that a key consideration for understanding socioeconomic need – on both sides of the funding threshold – should reflect the household circumstances that generate economic vulnerability, not only household income at a given point in time. Income mobility in particular is associated with measurable differences in household characteristics that are related to economic vulnerability. In this paper, we conceptualise a stratification schema around the funding threshold that is premised on mobility patterns over time as well as current living standards. Household income mobility is estimated using a multivariate probit model that explicitly accounts for endogeneity of initial conditions, unobserved heterogeneity, and non-random panel attrition. In doing so, we 1) provide a novel input to discussions about the design of a sustainable, comprehensive, and progressive financial aid scheme, 2) provide an important link between education financing and the social mobility literature more broadly, and 3) operationalise the multivariate probit model, which has typically been applied to poverty transitions, as a relevant empirical tool for a wider range of development policy applications. |