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Performance Funding in Higher Education: Do Financial Incentives Impact College Completions?

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  • Nicholas W. Hillman
  • David A. Tandberg
  • Jacob P. K. Gross

Abstract

In 2000, the Pennsylvania State System of Higher Education introduced a performance-based funding model aimed at increasing degree productivity among the state's public colleges. This study examines how the new policy affected undergraduate degree completions. Using a difference-in-differences estimation strategy, results suggest the policy has not systematically increased degree completions within the state. With limited evidence of the policy's effect, we conclude that this was an ineffective funding model in terms of its ability to increase college completions. Although we find modest impacts when compared against colleges in neighboring states, these impacts disappear when matched against similar colleges from other states.

Suggested Citation

  • Nicholas W. Hillman & David A. Tandberg & Jacob P. K. Gross, 2014. "Performance Funding in Higher Education: Do Financial Incentives Impact College Completions?," The Journal of Higher Education, Taylor & Francis Journals, vol. 85(6), pages 826-857, November.
    • Handle: RePEc:taf:uhejxx:v:85:y:2014:i:6:p:826-857
    DOI: 10.1080/00221546.2014.11777349
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    Cited by:

    1. V.G.R. Chandran & Mohammad Nourani & Sonia Kumari Selvarajan & Angathevar Baskaran, 2021. "Selective research funding policy and catching up the ladder in university research performance in Malaysia," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 539-550, April.
    2. Jason Ward & Ben Ost, 2021. "The Effect of Large-scale Performance-Based Funding in Higher Education," Education Finance and Policy, MIT Press, vol. 16(1), pages 92-124, Winter.
    3. Kelchen, Robert & Ortagus, Justin & Rosinger, Kelly & Cassell, Alex, 2022. "The effects of state performance funding policies on student loan debt," Economics of Education Review, Elsevier, vol. 91(C).
    4. Tommaso Agasisti & Ekaterina Abalmasova & Ekaterina Shibanova & Aleksei Egorov, 2019. "The Causal Impact Of Performance-Based Funding On University Performance: Quasi-Experimental Evidence From A Policy In Russian Higher Education," HSE Working papers WP BRP 221/EC/2019, National Research University Higher School of Economics.
    5. Amy Y. Li, 2017. "Covet Thy Neighbor or “Reverse Policy Diffusion”? State Adoption of Performance Funding 2.0," Research in Higher Education, Springer;Association for Institutional Research, vol. 58(7), pages 746-771, November.
    6. Nathan Favero & Amanda Rutherford, 2020. "Will the Tide Lift All Boats? Examining the Equity Effects of Performance Funding Policies in U.S. Higher Education," Research in Higher Education, Springer;Association for Institutional Research, vol. 61(1), pages 1-25, February.
    7. Jeffrey T. Denning & Eric R. Eide & Kevin J. Mumford & Richard W. Patterson & Merrill Warnick, 2022. "Why Have College Completion Rates Increased?," American Economic Journal: Applied Economics, American Economic Association, vol. 14(3), pages 1-29, July.
    8. Ashaari, Mohamed Azlan & Singh, Karpal Singh Dara & Abbasi, Ghazanfar Ali & Amran, Azlan & Liebana-Cabanillas, Francisco J., 2021. "Big data analytics capability for improved performance of higher education institutions in the Era of IR 4.0: A multi-analytical SEM & ANN perspective," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    9. Jan Morten Dyrstad & Mia Marie Wallgren Sohlman & Tor Henrik Teigen, 2021. "Government funding incentives and study program capacities in public universities: theory and evidence," Working Paper Series 19021, Department of Economics, Norwegian University of Science and Technology.
    10. Gary R. Pike & Kirsten R. Robbins, 2020. "Using Panel Data to Identify the Effects of Institutional Characteristics, Cohort Characteristics, and Institutional Actions on Graduation Rates," Research in Higher Education, Springer;Association for Institutional Research, vol. 61(4), pages 485-509, June.
    11. Tran, Trung & Thanh, Hai Trinh & Van Le, Dao & Phuong, Thao Trinh Thi & Lan, Phuong Nguyen, 2022. "Does government financial support decrease the inefficiency of public universities? A decomposition approach," Finance Research Letters, Elsevier, vol. 47(PA).
    12. Xiaodan Hu & Pedro Villarreal, 2019. "Public Tuition on the Rise: Estimating the Effects of Louisiana’s Performance-Based Funding Policy on Institutional Tuition Levels," Research in Higher Education, Springer;Association for Institutional Research, vol. 60(5), pages 636-669, August.
    13. Webber, Douglas A., 2017. "Risk-sharing and student loan policy: Consequences for students and institutions," Economics of Education Review, Elsevier, vol. 57(C), pages 1-9.
    14. Denisa Gándara & Amanda Rutherford, 2018. "Mitigating Unintended Impacts? The Effects of Premiums for Underserved Populations in Performance-Funding Policies for Higher Education," Research in Higher Education, Springer;Association for Institutional Research, vol. 59(6), pages 681-703, September.
    15. Joana R. Casanova & Adrián Castro-López & Ana B. Bernardo & Leandro S. Almeida, 2023. "The Dropout of First-Year STEM Students: Is It Worth Looking beyond Academic Achievement?," Sustainability, MDPI, vol. 15(2), pages 1-12, January.

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