The Impact of Financial Incentives on the Academic Performance of Aalto University Students

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master_Kuuttiniemi_Krista_2019.pdf (1.63 MB)

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School of Business | Master's thesis
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Date

2019

Department

Taloustieteen laitos

Major/Subject

Mcode

Degree programme

Economics

Language

en

Pages

44 + 10

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Abstract

Finnish universities struggle with long graduation times. By using data from Aalto University in 2013-2018 and a difference-in-differences method, I study the effects of a short-term mone-tary reward on the share of students completing their studies at annual target pace (60 credits annually), amount of annual credits and students' average grade. The reward is a EUR 500 scholarship, which can be earned annually if a student completes one's studies at target pace. It was taken into use in October 2016 in two out of six Aalto University schools. The scholarship increased the share of students proceeding at annual target pace by 4.6 per-centage points, while the control group did not change. The treatment group experienced a clear jump in the 60 credit threshold, while the control group had no similar effect. The effect of the scholarship was especially large in academic year 2017-2018, which might be due to the fact that it was the only full year in the post-treatment period when the scholarship was in use. Meanwhile, I observe no statistically significant impact on grades. Aalto University pays approximately EUR 2,500 for motivating one additional student to complete studies at annual target pace. As uni-versities receive funding for students proceeding in their studies near target pace, Aalto Univer-sity gained a return per additional student of EUR 302 in 2017, and EUR 224 in 2018. The real returns are likely to be larger as universities are also funded based on student graduation from bachelor and master's degrees.

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Thesis advisor

Bagues, Manuel

Keywords

financial incentives, academic performance, university students, economics

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https://urn.fi/URN:NBN:fi:aalto-201912156463

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