Creating the Out-of-State University: Do Public Universities Increase Nonresident Freshman Enrollment in Response to Declining State Appropriations?
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This study investigates whether public universities respond to declines in state appropriations by increasing nonresident freshman enrollment. State higher education appropriations declined substantially during the 2000s, compelling public universities to become more dependent on net-tuition revenue. State policy controls often limit the growth of resident tuition price. Therefore, public universities have an incentive to grow nonresident enrollment in order to grow tuition revenue. Drawing on resource dependence theory, we hypothesize that public universities respond to declines in state appropriations by growing nonresident freshman enrollment. Furthermore, we hypothesize that this response will be strongest at research universities because research universities enjoy strong demand from prospective nonresident students. We tested these hypotheses using a sample of all US public baccalaureate granting institutions and an analysis period spanning the 2002–2003 to 2012–2013 academic years. Fixed effects panel models revealed a strong negative relationship between state appropriations and nonresident freshman enrollment. This negative relationship was stronger at research universities than master’s or baccalaureate institutions. These results provide empirical support for assertions by scholars that state disinvestment in public higher education compels public universities to behave like private universities by focusing on attracting paying customers.
KeywordsState appropriations Nonresident enrollment Higher education finance Public universities Organizational behavior Tuition revenue
We would like to thank two anonymous reviews for thoughtful suggestions that strengthened the manuscript. We also thank two University of Arizona PhD students, Edna Parra for creating NPSAS descriptive statistics and Andrew Blatter for editorial assistance. Any remaining errors are our own.
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