The Impact of Liquidity Constraints on Higher Education Enrollment in Vietnam

抄録

  The higher education system in Vietnam has an experienced remarkable expansion in recent decades towards a mass-oriented education system. One of the key questions from the equity perspective is whether such expansion of higher education system has led to more equal distribution of opportunities. A widely held belief is that disparities in access to higher education between the rich and poor have been persistent. To ease the financial gaps among students’ families and to promote enrollment of poor students, financial assistance programs such as scholarships and subsidized student loans have been introduced.

  This study looks into the underlying assumption of such financial assistance programs. To what extent are low-income and qualified upper secondary graduates deprived of higher education opportunity because of their liquidity constraints, i.e. insufficiency of current financial capacity and access to credit against future income? Using the case of Vietnam, the study sets out to investigate (1) the effects of student background factors on access to higher education and (2) to what extent liquidity constraints affect chances of access to higher education.

  Empirical evidence about the impact of liquidity constraints have been rather inconclusive, showing mixed results for different contexts. One of the main difficulties associated with the debate is that financial constraints are intrinsically not directly measurable, and scholars have to rely on various sorts of indirect measurements. Despite this lack of coherent evidence, financial assistance programs to remedy short-term financial constraints have been popular policy interventions in many countries.

  Data from the Vietnamese Household Living Standard Survey (VHLSS) is used to estimate the effects of various student background factors and short-term liquidity constraints on their likelihood of higher education enrollment. A multinomial choice model is applied to allow for a multiplicity of enrollment alternatives: college and university. To control for long-term impacts of families’ financial capacities, the study creates a family wealth index using the Principal Component Analysis (PCA) method.

  The estimation results found that following the recent, rapid expansion of higher education; access to college education is now not significantly influenced by students’ family background. Equality in access to college education seem to have improved significantly in Vietnam. The findings, however, also indicate that students’ background continues to significantly affect the chances of university enrollment. Access to university education still remains unequally distributed despite the increased enrollment.

  Short-term liquidity constraints do seem to affect enrollment choices of upper secondary graduates; however, they seem to affect college enrollment and university enrollment both considerably and differently. Liquidity constraints are found to be deterring lower-income upper secondary graduates from attending universities, whereas no evidence of liquidity constraints was found for college enrollment. Low-income upper secondary graduates do not seem to be significantly deterred by a lack of current financial resources from attending colleges. The supply of college institutions in wider geographical areas may have contributed to reducing financial pressure for college enrollment. Financial assistance policies for the poor should be prioritized to alleviate financial difficulties for university applicants.