College Choice, Private Options, and The Incidence of Public Investment in Higher Education

John Bound and Andrew Simon

No 29353, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Previous measures of the incidence of public investment in higher education focus on the transfer to public college students. This implies that the net benefits to students who do not attend public colleges is negative. However, they miss potential general equilibrium effects on the private college and labor markets. Changes in the public college market affect who private colleges admit, what prices they charge, and the number of students who enroll in any college. We show that capturing these spillovers is important for characterizing incidence using a model of higher education that we validate with quasi-experimental variation in state spending. Unlike previous measures, we find that high-income-modest-ability students especially benefit since they are only admitted to high-quality private colleges when state spending is high, and the public colleges create sufficient competitive pressure. Decreased investment also reduces educational attainment, raising the college wage premium. This exacerbates private college market power.

JEL-codes: H22 H7 I23 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-edu
Note: ED PE
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w29353.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:29353

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w29353

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().