The Effect of Public Support on College Attainment

Philip A Trostel

doi:10.5539/hes.v2n4p58

Abstract

This study estimates the extent that state financial support for higher education raises college attainment. Despite its manifest importance for policy, this is the first study to estimate this effect directly. Many studies have estimated the effect of college price on attendance, but state support for higher education and college price do not have a one-to-one correspondence. Moreover, state support for higher education can affect enrollment through college quality, not just price. A two-stage instrumental-variables approach is employed to account for the possibility that state funding for higher education may endogenously depend on anticipated college enrollment. Using 22 years of U.S. interstate data (1985-2006) and controlling for fixed state effects, the results of this study indicate that state funding for higher education has significant causal effects on both college enrollment and degree attainment. The estimated state-support elasticity of college enrollment and college degree attainment is about 0.35.

Highlights

Various levels of government in the U.S spend more than $100 billion annually on tertiary education
The main reason for this substantial public expenditure is that it leads to significantly greater college attainment.Yet, there is almost no research quantifying this effect.Numerous studies have estimated the student response to net tuition and fees [this literature is surveyed by Leslie and Brinkman (1987), Heller (1997), and Deming and Dynarski (2009)], but not the response to public support for tertiary education. public funding for tertiary education can obviously reduce the net price that students must pay for a college education, the relationship is not one-to-one
The real value of dollars of state support for postsecondary education is lower in states with relatively high costs of living

Summary

Introduction

Various levels of government in the U.S spend more than $100 billion annually (one percent of national income) on tertiary education (according to the U.S National Income and Product Accounts). Koshal and Koshal (2000) estimate that each dollar of state postsecondary education funding per student reduces the net price by only about 40 cents This finding is confirmed more recently in Titus et al (2010), which finds the effect to be closer to 20 percent. Public support for higher education can affect college attendance and completion without necessarily affecting the net price.estimates of the price response of college enrollment or attainment are not necessarily the same as the response to public funding.from a policy perspective, perhaps the more pertinent question is about the student response to public funding rather than the average response to net tuition and fees. State- and local-government tax revenuesand K-12 expenditures are used as instruments for state- and local-government funding for postsecondary education

Econometric Models

Results

Conclusion