Small Differences that Matter: Mistakes in Applying to College

Higher Education, April 2014

In 1997, the ACT increased the num­ber of free score reports it pro­vided to stu­dents from three to four, main­tain­ing a $6 mar­ginal cost for each addi­tional report. In response to this $6 cost change, ACT-takers sent many more score reports and appli­ca­tions rel­a­tive to SAT-takers. They widened the range of col­leges they sent scores to, and low-income ACT-takers attended more-selective col­leges. Back-of-the-envelope cal­cu­la­tions sug­gest that the pol­icy sub­stan­tially increased low-income stu­dents’ expected earn­ings. This siz­able behav­ioral change in response to such a small cost change sug­gests that in this set­ting, small pol­icy per­tur­ba­tions can have large effects on welfare.