The Effect of Shocks to College Revenues on For-Profit Enrollment: Spillover from the Public Sector

Sarena Goodman and Alice Henriques Volz
Additional contact information
Sarena Goodman: https://www.federalreserve.gov/econres/sarena-f-goodman.htm
Alice Henriques Volz: https://www.federalreserve.gov/econres/alice-henriques-volz.htm

No 2015-25, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper investigates whether declines in public funding for post-secondary institutions have increased for-profit enrollment. The two primary channels through which funding might operate to reallocate students across sectors are price (measured by tuition) and quality (measured by resource constraints). We estimate, on average, that a 10 percent cut in appropriations raises tuition about 1 to 2 percent and decreases faculty resources by 1/2 to 1 percent, creating substantial bottlenecks for prospective students on both price and quality. These cuts, in turn, generate a nearly one percentage point increase in the for-profit market share of \"elastic\" enrollment (i.e. attendees of community colleges plus for-profit institutions), owing entirely to students who, in a better funding environment, would have attended a public institution. We estimate an elasticity of for-profit enrollment with respect to state and local appropriations of 0.2. Finally, we extend our analys is to show that for every 1 percent increase in flagship tuition generated by funding shortfalls, for-profit attendance increases by 1-1/2 percent.

Keywords: enrollment; for-profit colleges; public colleges; state appropriations (search for similar items in EconPapers)
Pages: 55 pages
Date: 2015-04-13
New Economics Papers: this item is included in nep-edu
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http://www.federalreserve.gov/econresdata/feds/2015/files/2015025r.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/FEDS.2015.025r1 DOI (application/pdf)
https://www.federalreserve.gov/econresdata/feds/2015/files/2015025pap.pdf Full text (Original) (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2015-25

DOI: 10.17016/FEDS.2015.025r1

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