Working Paper: NBER ID: w22901
Authors: Rodney Andrews; Kevin Stange
Abstract: This paper assesses the importance of price regulation and price discrimination to low-income students' access to opportunities in public higher education. Following a policy change in the state of Texas that shifted tuition-setting authority away from the state legislature to the governing board of each public university, most institutions raised sticker prices and many began charging more for high-return undergraduate majors, such as business and engineering. We use administrative data on Texas public university students from 2000 to 2009 matched to earnings records, financial aid, and new measures of tuition and resources at a program level to assess how deregulation affected the representation of disadvantaged students in high-return institutions and majors in the state. We find that poor students actually shifted towards higher-return programs following deregulation, relative to non-poor students. Deregulation facilitated more price discrimination by increasing grant aid for low-income students and also enabled supply-side enhancements such as more spending per student, which may have partially offset the detrimental effects of higher sticker price. The Texas experience suggests that providing institutions more autonomy over pricing and increasing sticker prices need not diminish the opportunities available to disadvantaged students.
Keywords: price regulation; price discrimination; higher education; Texas; low-income students
JEL Codes: I21; I22; I24; I26; I28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in need-based grant aid + enhancement in program quality and resources (I24) | mitigation of negative impacts of higher sticker prices (F69) |
| tuition deregulation (K29) | representation of disadvantaged students in high-return programs (I24) |
| tuition deregulation (K29) | earnings gap reduction between poor and nonpoor students' program choices (I24) |
| tuition deregulation (K29) | shift of poor students towards higher-return programs (I24) |