Working Paper: NBER ID: w22996
Authors: Brian G. Knight; Nathan M. Schiff
Abstract: Public universities in the United States typically charge much higher tuition to non-residents. Perhaps due, at least in part, to these differences in tuition, roughly 75 percent of students nationwide attend in-state institutions. While distinguishing between residents and non-residents is consistent with welfare maximization by state governments, it may lead to economic inefficiencies from a national perspective, with potential welfare gains associated with reducing the gap between in-state and out-of-state tuition. We first formalize this idea in a simple model. While a social planner maximizing national welfare does not distinguish between residents and non-residents, state governments set higher tuition for non-residents. The welfare gains from reducing this tuition gap can be characterized by a sufficient statistic relating out-of-state enrollment to the tuition gap. We then estimate this sufficient statistic via a border discontinuity design using data on the geographic distribution of student residences by institution.
Keywords: tuition; higher education; welfare; enrollment; public universities
JEL Codes: D7; H7; I2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tuition gap (I24) | economic inefficiencies (D61) |
| tuition gap reduction (I24) | welfare gains (D69) |
| higher out-of-state tuition (H79) | discourage enrollment (Y40) |
| out-of-state tuition (H79) | student enrollment (I23) |
| in-state tuition (H73) | student enrollment (I23) |
| sharp discontinuity at state borders (H73) | enrollment patterns (I23) |