Do Human Capital Decisions Respond to the Returns to Education? Evidence from DACA
AbstractThis paper studies the human capital responses to a large shock in the returns to
education for undocumented youth. We obtain variation in the benefits of schooling
from the enactment of the Deferred Action for Childhood Arrivals (DACA) policy in
2012, which provides work authorization and deferral from deportation for high school
educated youth. We implement a difference-in-differences design by comparing DACA
eligible to non-eligible individuals over time, and we find that DACA had a significant
impact on the investment decisions of undocumented youth. High school graduation
rates increased by 15 percent while teenage births declined by 45 percent. Further, we
find that college attendance increased by 25 percent among women, suggesting that
DACA raised aspirations for education above and beyond qualifying for legal status.
We find that the same individuals who acquire more schooling also work more (at the
same time), counter to the typical intuition that these behaviors are mutually exclusive,
indicating that the program generated a large boost in productivity.