Essays in Household Finance and Education Finance
This dissertation consists of three essays in household finance and education finance. The first essay studies how the portfolio allocation of college savings affects children's college attendance and student debt using novel data on 529 college savings accounts linked with student-level longitudinal data. Employing exogenous variation in the portfolio allocation of 529 accounts driven by institutional details in the asset management sector, the study finds that investing a higher share of college savings in risky assets over a long horizon results in a higher probability of attending a four-year college and lower student debt. The effect is more pronounced for students who receive less financial aid, and its magnitude depends on market performance during the saving period. These results are driven by a positive impact of risk premium on accumulated college savings. The second essay empirically studies how college savings motives affect household stock market participation. More than 65% of households saving for college allocate at least a portion of their college savings to stocks, which are also the most popular class of risky assets for college savings investments. Employing the implementation of a financial aid program that eliminated college saving motives for some military households, the study demonstrates that it reduced the probability of stock market participation outside of retirement accounts for these households by more than a quarter. The study provides additional evidence that college savings motives explain a significant share of stock market participation by demonstrating that only one form of college savings, education savings accounts, accounts for 21% of stock market participation outside of retirement accounts for households with children. The third essay, based on joint work with Claire Celerier and Boris Vallee, examines the determinants of wages in finance academia. By exploiting an extensive dataset covering wages, publications and socio-demographics for 80,000 public-university faculty from all fields, the study shows that tenure-faculty in finance earn wages 50% higher than in other fields. The premium is larger for faculty at highly ranked institutions and for junior faculty. Finance faculty wages are significantly more sensitive to students' future compensation than in other fields. Finance academia is characterized by high university revenues per faculty, a limited supply of relevant profiles, and attractive outside options prior to doctoral studies.
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