Credit Constraints and the Racial Gap in Post-Secondary Education in South Africa

This paper analyzes the impact of high school household income and scholastic ability on post-secondary enrollment in South Africa. Using longitudinal data from the Cape Area Panel Study, we analyze the large racial gaps in the proportion of high school graduates who enroll in university and other forms of post-secondary education. Our results indicate that family background and high school achievement are strong predictors of post-secondary enrollment and statistically account for all of the black-white difference in enrollment. Controlling for parental education and baseline scholastic ability reduces the estimated impact of household income on university enrollment, though there continues to be an effect at the top of the income distribution. We also find evidence of credit constraints on other forms of post-secondary enrollment. Counterfactual estimates indicate that if all South Africans had the incomes of the richest whites, African university enrollment would increase by 65%, even without changing parental education or high school academic achievement. The racial gap in university enrollment would narrow only slightly, however. Our results suggest that the racial gap in postsecondary enrollment results mainly from the from the large racial gap in high school academic achievement.