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The Functions and Dysfunctions of College Rankings: An Analysis of Institutional Expenditure

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Abstract

College rankings have become a powerful influence in higher education. While the determinants of educational quality are not clearly defined, college rankings designate an institution’s standing in a numerical order based on quantifiable measurements that focus primarily on institutional resources. Previous research has identified the “functions” of rankings: higher ranking positions benefit institutions via admissions outcomes, resource attainment, and future reputation. On the other hand, this positive association between rankings and resource attainment has increased concerns among higher education community about “dysfunctions” of rankings. Rankings may encourage colleges and universities to spend more, moving resources from educational activities to research, amenities and facilities, and administrative expenditures. Filling the gap in the literature in empirically evaluating this hypothesis, this study examined the effect of ranking systems on resource allocation using U.S. News and World Report’s Best Colleges rankings. The numerical ranking resulted in an expansion in both educational and noneducational activities expenditures, including the escalation of student and academic services expenditures. Instruction expenditure was the major area in which institutions altered resource allocation in response to the distinctive nature of ranking systems, the numerical rankings and arbitrary groupings. These patterns were manifested differently among schools categorized as National Universities and those categorized as National Liberal Arts Colleges. The findings from this study provide important implications for understanding the role of college rankings that reinforce the resource-based view of institutional quality and institutional responses, as well as its ramifications to the missions of higher education.

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Notes

  1. U.S. News categorizes colleges and universities as National Universities, National Liberal Arts Colleges, Regional Universities, and Regional Liberal Arts Colleges based on the Carnegie Classification of Institutions of Higher Education and generates separate rankings for each institutional category. This study focuses on the first two categories. Other rankings, such as rankings of specialty schools and professional and graduate programs, have been produced by U.S. News and World Report and other media, and study of these rankings can also provide insights into various institutional responses to ranking systems.

  2. In 1990, U.S. News added a “tier” system that divides schools that are not included in the numerical rankings (Top 25) into quartiles and lists the name of institutions in alphabetical order. Due to the expansion of the numerical rankings in 1995, institutions other than the top 50 were grouped into tiers 2, 3, and 4. Similarly, between 2003 and 2009, schools other than the top 120 were listed as tiers 3 and 4.

  3. Other measures include reputation (22.5%; reduced from 25% in 2010), faculty resources (20%; reduced from 25% in 1993), retention and graduation (25%; gradually expanded from 5% over time), alumni giving (5%; since 1993), and graduation rate performance (7.5%; employed in 1996 at 5% and increased to 7.5% in 2010).

  4. In 2003, yield rate was dropped from the indicators. Weights on the remaining indicators were also changed: acceptance rate (reduced from 15 to 10%), percentage of freshmen who were in the top 10% of their high school class (increased by 5%), and average SAT/ACT scores (increased by 10%).

  5. Since 2010, all National Universities and National Liberal Arts Colleges have been assigned numerical positions (top 200 or more); however, for the periods included in the analysis of this study, only about 120 universities were numerically ranked in each ranking category.

  6. The number of schools that are affected by this was very small in the sample: 36 universities among the National Universities sample, 3 among the National Liberal Arts Colleges sample. On average, about 85% of the enrollment was from the parent campus in this sample. Also, the schools evaluated by U.S. News were mostly main campuses, and only one case included both the main campus and another campus in the same ranking category: Rutgers–New Brunswick and Newark. As I aggregated variables for all Rutgers campuses to the New Brunswick campus, I dropped the Newark campus from the sample. Estimates did not change in terms of significance and magnitude when those schools were removed from the sample.

  7. Considering the long periods of time used in the design, it is possible that other institutional factors such as endowment or total revenue from various sources including tuition and fees might also affect the expenditures, in addition to the rankings. When I include these variables in the DD model, results were similar to the results of the main specification; these results are available from the author by request.

  8. Because most of the National Liberal Arts Colleges (about 98% of the sample) are private, only institution and year fixed effects were included for all specifications for this sample.

  9. Since the scale and overall availability of resources might influence resource allocation (Baker 2003), I also estimated models controlling for the total revenue of schools and/or endowment size (market value) for each year. The results were similar to the results of the main specification and are available from the author by request.

  10. This is in part due to the changes in the IPEDS reporting (accounting) standards. For recent years, more, although not exhaustive, details have been provided.

  11. Author (2016) investigated the effect of rankings on institutional financial aid, including the trade-offs between need- and merit-based aid; also, the author is currently investigating the effect of rankings on pricing and student composition.

  12. The dependent variables are log transformation of the expenditure. Therefore, the reported coefficients compare percentage changes in spending between ranked and unranked institutions. Considering the fact that the magnitude of expenditure per FTE varies across institutions, I also estimated the absolute change in dollar amount. For both National Universities and National Liberal Arts Colleges, the average change in raw dollar amount was bigger than the calculated amount based on the percentage points. For example, in actual dollars, total expenditure increased by about $4291 and $3314 at National Universities and Liberal Arts Colleges, respectively.

  13. Reputation was reported as a rank order until 1996. From 1997, reputation scores (maximum 5 points) are reported for all National Universities and National Liberal Arts Colleges. The analysis reported here employed reputation scores, and therefore included only years 1997–2010.

  14. For a robustness check, I also employed other intervals—5–7 points from the cutoffs, respectively. The results were consistent with those from the ±4-point model, and the sign, magnitude, and significance were similar across different definition of margins. See Appendix Tables 9 and 10.

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Acknowledgements

I would like to thank Michael N. Bastedo, Stephen L. Desjardins, Janet H. Lawrence and Kevin, M. Stange at the University of Michigan for their valuable suggestions on the earlier version of the manuscript. I also thank two anonymous reviewers for their thoughtful suggestions that strengthened the manuscript.

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  1. Mary Lou Fulton Teachers College, Arizona State University, 1050 S Forest Mall, Tempe, AZ, 85281, USA

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Appendix

Appendix

See Fig. 4 and Tables 7, 8, 9, 10.

Fig. 4
figure 4

Average changes in positions by rank

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Table 7 Descriptive statistics
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Table 8 Definition of dependent variables: expenditure categories
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Table 9 Robustness check analysis: heterogeneous effect of rankings on expenditures—National Universities
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Table 10 Robustness check analysis: Heterogeneous effect of rankings on expenditures—Liberal Arts Colleges
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Kim, J. The Functions and Dysfunctions of College Rankings: An Analysis of Institutional Expenditure. Res High Educ 59, 54–87 (2018). https://doi.org/10.1007/s11162-017-9455-1

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