The Effects of Nationwide Tuition Fee Elimination on Education Outcomes

I study the effects on education outcomes of nationwide primary and secondary school fee eliminations in South Africa. This policy shifted education financing from a mixed user fee and government transfer system to a pure transfer system. This mirrors policy debates in developed and developing countries about the optimal mix of school fees, (subsidized) loans, and transfers to finance primary, secondary, and tertiary education. I find that fee elimination has a small positive effect on enrollment, a small negative effect on secondary school graduation, and near-zero effects on grade progression, per-student school resources, and the socio-economic profile of the enrolled students. My results are robust to accounting for school-level selection into fee elimination, differential time trends between fee-eliminating and fee-charging schools, and student transfers between fee-charging and fee-eliminating schools. The enrollment effects imply a price elasticity of -0.10 for secondary school enrollment and 0 for primary school enrollment. This price insensitive demand is not explained by ceiling effects on enrollment, capacity constraints in schools, or measurement error in administrative data. I argue that the pattern of results may reflect low valuation of additional years of education by youths living near fee-eliminating schools, potentially due to a weak relationship between enrollment and subsequent attainment. My results show that when education quality is low, demand-side subsidies may have limited ability to increase education participation and can even lower attainment.