Research Spotlight - Cauê Dobbin and Sebastián Otero
Cauê Dobbin and Sebastián Otero have formed a productive partnership and are working together on several research projects focusing on Education and Inequality. The motivation behind their agenda is to understand the consequences of large-scale public policy and the unintended ramifications that may reinforce or undermine their intended effects. They combine economic theory with careful empirical analysis to estimate the effects of different policies and use their findings to propose alternative policy designs that would result in better outcomes.
For example, numerous governments have subsidized student loans programs to promote access to higher education: in OEDC countries, 10% of the public expenditure in higher education goes to student loans. However, policymakers and academic researchers have long been concerned that these programs enable colleges to raise tuition and capture a large share of the invested public funds. Cauê and Sebastian address this issue in their collaboration titled "The Equilibrium Effects of Subsidized Student Loans."
In this paper, they investigate a large policy change in Brazil that drastically reduced the availability of government-funded student loans and was followed by a massive increase in private financial aid in the form of tuition discounts. Motivated by these empirical patterns, they develop a model of the supply and demand for higher education. They estimate the model using a rich dataset covering the universe of colleges and students in Brazil, built from administrative databases obtained through partnerships with public and private organizations. Their main finding is that subsidized student loans do not necessarily lead to higher tuition costs and that the effect of such programs depends on which students receive the loans. They show that if loans were offered only to low-income students, tuition would be lower, leading to a substantial increase in enrollment.
In a separate paper, they study the consequences of a large-scale affirmative action policy implemented in Brazil. The regulation mandated all public institutions to increase the number of reserved seats for public high school students to half of the total. The discussion surrounding the value of AA policies centers around a hypothetical trade-off between equity and efficiency. While affirmative action advocates highlight the equity merits of such policies, critics are concerned with the potential effects on the system's overall efficiency. At the heart of the discussion is the fact that AA pushes targeted students into selective degrees by discriminating against allegedly more qualified candidates. Their paper shows that this trade-off gets attenuated when displaced individuals have access to private colleges that are not affordable to targeted students. Using detailed data from centralized admissions and labor market records, they show that the policy increased the overall equity of the system without creating efficiency losses.
Both projects have benefited from the insights of different fields. During their Ph.D., Cauê took the Public Economics sequence, and Sebastián the Industrial Organization one. Both have also been active participants in the Labor and Development groups. As a result, they have been exposed to a wide span of methods that allow them to address real-world issues from different angles, providing helpful insight into important policy questions. Both are graduating from Stanford this year but plan to keep this fruitful partnership as they move forward with their careers.