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State funding for public higher education: explaining the great retreat


  • Stone, Joe


This study examines reasons for the decline in state funding for public higher education. Prior studies point to Medicaid costs, limitations on tax revenues, income inequality, and Pell grants, but do not estimate their relative importance. Results in this study indicate that income inequality, Pell grants, and K-12 funding are the dominant factors. Pell grants in particular, create powerful incentives for states to substitute Federal dollars for their own. Estimates are identified using 5-year difference-in-differences for 49 states from 1957 to 2007. Regression, instrumental-variables, and Granger-causality estimates yield consistent results.

Suggested Citation

  • Stone, Joe, 2012. "State funding for public higher education: explaining the great retreat," MPRA Paper 39732, University Library of Munich, Germany, revised Mar 2012.
  • Handle: RePEc:pra:mprapa:39732

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    References listed on IDEAS

    1. Robert B Archibald & David H Feldman, 2004. "State Higher Education Spending and the Tax Revolt," HEW 0412003, EconWPA.
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    Cited by:

    1. Stone, Joe A., 2016. "A Poison Pell for Public Colleges? Pell Grants and Funding for Public Colleges in the U. S," MPRA Paper 71761, University Library of Munich, Germany.
    2. Davis, Matt & Vedder, Andrea & Stone, Joe, 2015. "Local Tax Limits, Student Achievement, and School-Finance Equalization," MPRA Paper 63704, University Library of Munich, Germany.

    More about this item


    higher education; pell grants; k=12 education; public funding;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • A1 - General Economics and Teaching - - General Economics
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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