Investing in Colleges Boosts Attainment More than Tuition Cuts.
The researchers find that reducing the price of higher education through tuition cuts has no discern-able effect on enrollment, while a 10 percent increase in institutional spending increases enrollment by 3 percent. They analyze data from the Integrated Postsecondary Education Data System and a newly constructed data source on state tuition caps and freezes imposed by state legislatures.
There are important differences across states, and within states over time, in financial support for postsecondary education. In California, inflation-adjusted per capita state government appropriations for higher education rose from about $5,000 in 1990 to $6,000 in the early 2000s, then fell to less than $4,000 in 2013. In Texas, inflation-adjusted per capita spending was steady at about $4,000. Standard data from the Bureau of Labor Statistics and the Bureau of the Census are used to control for state and county economic and demographic differences. The estimates imply that the marginal cost of producing an additional bachelor's degree ranges from $102,532 to $155,451.
States can support postsecondary education by lowering the price students face, with tuition support or scholarships, or by funding colleges directly and allowing the institutions to spend the money as they see fit. The researchers find that increased institutional spending leads to higher persistence of students--those who enroll are more likely to stay--and to greater degree completion among enrolled students.
In recent years, informal capacity constraints have been reported in many public institutions. The researchers note that "reduced course offerings, long waitlists, little or no student guidance, and larger class sizes" all make it harder to complete a degree. They report that schools spend about 40 cents of every additional dollar of funding on instructional spending and academic support, and argue that this increased spending may enable schools to reduce informal capacity constraints.
There is some evidence that increased spending by public postsecondary schools crowds out enrollment in private institutions providing associate degrees, but no evidence that it has any effect on four-year degrees. The researchers conclude that "government programs aimed at reducing college costs will not increase degree attainment if cost reduction is achieved by reducing perstudent spending" because "spending cuts affect core instruction and academic support, generating large downstream impacts on educational attainment."
Decreasing student costs by reducing tuition does not increase postsecondary attainment, but improving schools' quality and capacity does. Other Fields Show Rising Interest in Economics Research
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|Publication:||The NBER Digest|
|Date:||Oct 1, 2017|
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