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.
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All reported monetary values have been adjusted to constant 2012 dollars.
Total revenue is defined as the sum of total operating and total non-operating revenue.
We acknowledge that H2 could utilize a different construct to classify institutions (e.g., US News and World Report, Barron’s, average SAT/ACT score, athletic conference, etc.). However, we believe that the 2000 Carnegie Classification does a reasonable job of (a) capturing institutional characteristics associated with nonresident enrollment demand (e.g., academic profile, expenditure per student, college athletics) and (b) defining the overall analysis sample while creating sub-groups of institutions (e.g. research-extensive versus master’s) with sufficient sample size for analyses.
For each dependent variable analyzed, Hausman tests of whether a random effects estimator would be consistent were rejected in all cases (p < 0.01).
Expenditure measures were defined as total institutional expenditures rather than expenditure per full-time equivalent student as the models directly controlled for institutional enrollment size.
Data points for Figure A only include years where the residency component of the IPEDS Fall Enrollment survey was mandatory.
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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.
See Table 6.
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Jaquette, O., Curs, B.R. Creating the Out-of-State University: Do Public Universities Increase Nonresident Freshman Enrollment in Response to Declining State Appropriations?. Res High Educ 56, 535–565 (2015). https://doi.org/10.1007/s11162-015-9362-2
- State appropriations
- Nonresident enrollment
- Higher education finance
- Public universities
- Organizational behavior
- Tuition revenue