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The Impact of Price Caps and Spending Cuts on U.S. Postsecondary Attainment

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  • David J. Deming
  • Christopher R. Walters

Abstract

Increasing the postsecondary attainment rate of college-age youth is an important economic priority in the U.S. and in other developed countries. Yet little is known about whether different forms of public subsidy can increase degree completion. In this paper, we compare the impact of the marginal taxpayer dollar on postsecondary attainment when it is spent on lowering tuition prices versus increasing the quality of the college experience. We do so by estimating the causal impact of changes in tuition and spending on enrollment and degree completion in U.S. public postsecondary institutions between 1990 and 2013. We estimate these impacts using a newly assembled data set of legislative tuition caps and freezes, combined with variation in exposure to state budget shocks that is driven by differences in historical reliance on state appropriations. We find large impacts of spending on enrollment and degree completion. In contrast, we find no impact of price changes. Our estimates suggest that spending increases are more effective per-dollar than price cuts as a means of increasing postsecondary attainment.

Suggested Citation

  • David J. Deming & Christopher R. Walters, 2017. "The Impact of Price Caps and Spending Cuts on U.S. Postsecondary Attainment," NBER Working Papers 23736, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23736
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    Cited by:

    1. Steven W. Hemelt & Kevin M. Stange & Fernando Furquim & Andrew Simon & John E. Sawyer, 2018. "Why is Math Cheaper than English? Understanding Cost Differences in Higher Education," NBER Working Papers 25314, National Bureau of Economic Research, Inc.
    2. Russell, Lauren, 2019. "Better outcomes without increased costs? Effects of Georgia’s University System consolidations," Economics of Education Review, Elsevier, vol. 68(C), pages 122-135.
    3. Brad Hershbein & Melissa Schettini Kearney & Luke W. Pardue, 2020. "College Attainment, Income Inequality, and Economic Security: A Simulation Exercise," NBER Working Papers 26747, National Bureau of Economic Research, Inc.
    4. Canaan, Serena & Deeb, Antoine & Mouganie, Pierre, 2019. "Advisor Value-Added and Student Outcomes: Evidence from Randomly Assigned College Advisors," IZA Discussion Papers 12739, Institute of Labor Economics (IZA).
    5. Yi Lu & Hong Song, 2020. "The effect of educational technology on college students’ labor market performance," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(3), pages 1101-1126, July.
    6. Ziad R. Ghandour, 2019. "Public-Private Competition in Regulated Markets," NIPE Working Papers 02/2019, NIPE - Universidade do Minho.
    7. Anderson, Drew M. & Goldrick-Rab, Sara, 2018. "Aid after enrollment: Impacts of a statewide grant program at public two-year colleges," Economics of Education Review, Elsevier, vol. 67(C), pages 148-157.

    More about this item

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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