State appropriations and undergraduate borrowing: more debt, less money

Samuel R. Raisanen and Kathryn F. Birkeland

Applied Economics Letters, 2016, vol. 23, issue 8, 566-570

Abstract: When state appropriations decrease, public universities respond by raising tuition. Students borrow more in response to both tuition increases and appropriation cuts. This article investigates the feedback of how borrowing and tuition influence state appropriations. Using a panel data set of 450 four-year public universities from 1999 to 2012, we employ three-stage least squares techniques to control for the endogeneity between state appropriations, tuition and student borrowing. There is evidence that state policy-makers respond to increases in university tuition and student borrowing by decreasing future appropriation levels. After controlling for the effect of appropriations on tuition and borrowing, a one-dollar increase in student borrowing reduces state appropriations per student by $0.06, and a one-dollar increase in tuition results in a decrease of $0.45 in state appropriations per student. When universities increase tuition for reasons other than a reduction in state appropriations, policy-makers respond with a significant cut in future appropriations which could signal an incentive strategy.

Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2015.1088135 (text/html)
Access to full text is restricted to subscribers.

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:taf:apeclt:v:23:y:2016:i:8:p:566-570

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2015.1088135

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().