Private transfers and college students' decision to work

We estimate the impact of external financial support on the labor supply of students during their tertiary education. Using a dynamic labor supply model and accounting for the endogeneity of income from private transfers, we find a significantly lower likelihood of being employed for transfer recipients. Our results suggest that private transfers lead to a shift in students' time allocation, lowering their hours devoted to working and increasing their time devoted to studying. We find evidence for a psychological component of receiving transfers through an increase in the perceived risk of failure in academic studies.