The Effects of Merit-Based Scholarships on Educational Outcomes

This paper analyzes the effect of a statewide merit-based scholarship program on educational outcomes in Arizona. It tests whether Arizona’s Instrument to Measure Standards (AIMS) scholarship has an effect on a comprehensive set of educational outcomes such as the number of applicants, student admissions, first-year first-time enrollment, ACT scores of entering freshman, retention rates, as well as on the level of tuition and fees at the three schools targeted by the program; Arizona State University, University of Arizona and Northern Arizona University. Both difference-in-differences estimation as well as synthetic control methods shows that AIMS has an economically and statistically significant effect enrollment. Enrollment effects are greatest among African American and Hispanic students and are significant for both men and women. While point estimates suggest that AIMS also lead to increases in tuition and fees, these results are not robust to placebo tests.