Aftermarket Frictions and the Cost of Off Platform Options In Centralized Assignment Mechanisms

Abstract

We study the welfare and human-capital impacts of the configuration of on- and off-platform options in the context of Chile’s centralized higher education platform, leveraging administrative data and two policy changes: the introduction of a large scholarship program, and an expansion of the number of on-platform slots by approximately 40%. We first show that more programs’ joining the platform led students to start college sooner and raised the share of students who graduated on time. We then develop a model of college applications, offers, waitlists, and matriculation choices, which we estimate using students’ ranked-ordered applications, on- and off-platform enrollment, and on-time graduation outcomes. When more programs join the platform, welfare increases, and the extent of aftermarket frictions matters less for welfare, enrollment, and graduation rates. High-SES students have greater access to off-platform options, and gains from platform expansion are larger for students from lower-SES backgrounds. Our results indicate that expanding the scope of a higher education platform can have real impacts on welfare and human capital.