Credit constraints in higher education attendance: Longitudinal evidence from Ethiopia

Abstract In this paper, we examine the relationship between household wealth and higher education enrolment, with a focus on the evidence surrounding credit constraints in postsecondary education. Using unique longitudinal data that link household wealth and measures of cognitive ability at age 12 to higher education attendance at age 19–22, we differentiate short‐term credit constraints from long‐term credit constraints and test the relative importance of short‐ and long‐term credit constraints in schooling decisions. We find that short‐ and long‐term credit constraints determine the relationship between household wealth and higher education attendance. There is a need to complement short‐term policies with long‐term interventions that empower households to continue to invest in human capital development over the child's life cycle, which will crystallize in higher cognitive ability and readiness for higher education.