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Do Business Cycles Affect State Appropriations to Higher Education?

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  • Brad R. Humphreys

Abstract

Spending on higher education constitutes an important and increasing portion of state government spending and a major source of operating funds at public institutions of higher education. Anecdotal evidence suggests that state appropriations are subject to cyclical variation. An analysis of state appropriations to higher education, enrollment in two- and four-year public colleges and universities, and state-specific measures of the business cycle for all 50 states over the period 1969–1994 shows that state appropriations to higher education are highly sensitive to changes in the business cycle. A 1% change in real per capita income was, on average, associated with a 1.39% change in real state appropriations per full-time equivalent student enrolled. This implied decline in state government funding, coupled with the increase in enrollment in higher education during recessions reported by Betts and McFarland (1995), suggest that public institutions of higher education may experience fiscal stress during economic downturns. These results also suggest that state legislators and education policymakers should reconsider their higher education funding policies during recessions in order to allow public colleges and universities to provide dislocated workers with access to quality education and training during these periods.

Suggested Citation

  • Brad R. Humphreys, 2000. "Do Business Cycles Affect State Appropriations to Higher Education?," Southern Economic Journal, Southern Economic Association, vol. 67(2), pages 398-413, July.
  • Handle: RePEc:sej:ancoec:v:67:2:y:2000:p:398-413
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    Cited by:

    1. Brad R. Humphreys, 2003. "The Relationship Between Big-Time College Football and State Appropriations to Higher Education," UMBC Economics Department Working Papers 03-102, UMBC Department of Economics.
    2. Delaney, Jennifer A. & Kearney, Tyler D., 2015. "The impact of guaranteed tuition policies on postsecondary tuition levels: A difference-in-difference approach," Economics of Education Review, Elsevier, vol. 47(C), pages 80-99.
    3. Catalin Dragomirescu-Gaina, 2015. "An empirical inquiry into the determinants of public education spending in Europe," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-24, December.
    4. Alison Felix & Adam Pope, 2010. "The importance of community colleges to the Tenth District economy," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 69-93.
    5. Bhatt, Rachana & Rork, Jonathan C. & Walker, Mary Beth, 2011. "Earmarking and the business cycle: The case of state spending on higher education," Regional Science and Urban Economics, Elsevier, vol. 41(4), pages 352-359, July.
    6. Robert R. Dunn, 2015. "Outmigration and State and Local Appropriations for Public Higher Education," The Review of Regional Studies, Southern Regional Science Association, vol. 45(3), pages 237-251, Winter.
    7. Johnson, Matthew T., 2013. "The impact of business cycle fluctuations on graduate school enrollment," Economics of Education Review, Elsevier, vol. 34(C), pages 122-134.

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