Tuition Fees and Student Effort at University

This paper presents theoretical and empirical evidence that an increase in tuition fees may boost university students' academic effort. We examine the tuition fee rise introduced in 2012 by Spanish universities, where students register and pay for their chosen modules and fees increase each time students retake a module until they pass it. Data refer to students of economics, business and medicine at the University of Valencia during 2010-2014. The fact that some students pay fees in full while others are exempt from payment provides an identifying source of variation that we exploit using a flexible difference-in-differences methodology.