College entry exams: a dynamic discrete choice model

Abstract

A simple mechanism is used in some universities in Brazil to select students at entry and allocate them into various majors. Students rst choose a major and then take exams that either select them in the chosen major or select them out. The matching literature analyzing the student placement issue, points out that this mechanism is not fair and is strategic. Pairs of major & students can be made better o¤ and students tend to disguise their preferences. We build up a dynamic model of choice of major and of grading as well as e¤ort exerted to be successful where preferences are carefully modelled. We estimate this model by simulated using cross-section data about entry exams at Universidade Federal do Ceara in Brazil in 2004. Using the empirical results of the model estimation, we then evaluate changes in the way choices are given to the prospective students. Ex-ante expected utilitarian social welfare indeed increases but it hides very strong distributive e¤ects among students. Strategic e¤ects are found to be very strong.