A dynamic perspective on profiling financial-aid eligibility: the case of South Africa

Abstract

Abstract The sustainable funding of tertiary education is a subject of significant policy debate worldwide. In South Africa, the need to balance equitable access within a constrained fiscal environment has been a complex challenge. A legacy of racially segregated educational opportunities, together with student activism and protests, has shaped the political economy surrounding tertiary education funding. Policymakers continue to be faced with the challenge of funding students whose household income is too high to meet state financial aid eligibility, yet who struggle to afford tuition and accommodation expenses. In this context, exploring a policy instrument that differentiates students based on multidimensional socioeconomic need is critical. We motivate for a differentiated policy instrument that considers economic uncertainty of households as a dimension of socioeconomic need. A purpose of our paper is therefore to illustrate that income mobility can contribute to household vulnerability, and therefore to funding need. 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. We operationalise this model as a relevant empirical tool for analysing and understanding the implementation, expansion, and targeting of social policy more generally.