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.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Price includes VAT (USA)
Tax calculation will be finalised during checkout.
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.
Abraham, K. G., & Clark, M. A. (2006). Financial aid and students’ college decisions: Evidence from the District of Columbia tuition assistance grant program. The Journal of Human Resources, 41(3), 578–610.
Adams, W. (1977). Economic problems confronting higher education: Financing public higher education. American Economic Review, 67(1), 86–89.
Adkisson, R. V., & Peach, J. T. (2008). Non-resident enrollments and non-resident tuition at land grant colleges and universities. Education Economics, 16(1), 75–88.
Archibald, R. B., & Feldman, D. H. (2006). State higher education spending and the tax revolt. Journal of Higher Education, 77(4), 618–644.
Barringer, S. N. (2013). Limitations on the role of stakeholders and the diverse effects of market conditions: College and university finances, 1980–2010. Unpublished dissertation. University of Arizona. Department of Sociology.
Baryla, E. A., & Dotterweich, D. (2001). Student migration: Do significant factors vary by region? Education Economics, 9(3), 269–280.
Baum, C. F. (2009). Instrumental variables and panel data methods in economics and finance. Boston College and DIW Berlin.
Berry, C. R. (2011). Instrumental variables, part II. Chicago, IL: University of Chicago.
Bound, J., Groen, J., Kezdi, G., & Turner, S. (2004). Trade in university training: Cross-state variation in the production and stock of college-educated labor. Journal of Econometrics, 121(1–2), 143–173.
Bound, J., Lovenheim, M., & Turner, S. (2010). Why have college completion rates declines? An analysis of changing student preparation and collegiate resources. American Economic Journal-Applied Economics, 2(3), 1–31.
Bowen, H. R. (1980). The costs of higher education: How much do colleges and universities spend per student and how much should they spend? (1st ed.). San Francisco: Jossey-Bass Publishers.
Cameron, A. C., & Trivedi, P. K. (2005). Microeconometrics: Methods and applications. New York, NY: Cambridge University Press.
Cheslock, J. J., & Gianneschi, M. (2008). Replacing state appropriations with alternative revenue sources: The case of voluntary support. Journal of Higher Education, 79(2), 208–229.
Cheslock, J. J., & Kroc, R. (2012). Managing college enrollments. In R. Howard, B. Knight, & G. McLaughlin (Eds.), The handbook for institutional researchers (pp. 221–236). San Francisco, CA: Jossey-Bass.
Cheslock, J. J., & Rios-Aguilar, C. (2011). Multilevel analysis in higher education research: A multidisciplinary approach. Higher Education: Handbook of Theory and Research, 26, 85–123.
Clotfelter, C. T. (1976). Public spending for higher education: An empirical test of two hypotheses. Public Finance, 31(2), 177–195.
Cooke, T. J., & Boyle, P. (2011). The migration of high school graduates to college. Educational Evaluation and Policy Analysis, 33(2), 202–213.
Cornwell, C., Mustard, D. B., & Sridhar, D. J. (2006). The enrollment effects of merit-based financial aid: Evidence from Georgia’s HOPE program. Journal of Labor Economics, 24(4), 761–786.
Covaleski, M. A., & Dirsmith, M. W. (1988). An institutional perspective on the rise, social transformation, and fall of a university budget category. Administrative Science Quarterly, 33(4), 562–587.
Curs, B. R. (2010). What can financial aid buy? The effects of financial aid packages on the enrollment decisions of applicants to a large public university. University of Missouri working paper.
Curs, B. R., & Singell, L. D. (2002). An analysis of the application and enrollment processes for in-state and out-of-state students at a large public university. Economics of Education Review, 21(2), 111–124.
Curs, B. R., & Singell, L. D. (2010). Aim high or go low? Pricing strategies and enrollment effects when the net price elasticity varies with need and ability. Journal of Higher Education, 81, 515–543.
Davis, G. F., & Cobb, J. A. (2009). Resource dependence theory: Past and future. Research in the Sociology of Organizations, 28, 21–42.
Delaney, J. A., & Doyle, W. R. (2007). The role of higher education in state budgets. In K. M. Shaw & D. E. Heller (Eds.), State postsecondary education research: New methods to inform policy and practice (1st ed., pp. 55–76). Sterling, Va.: Stylus Pub.
Delaney, J. A., & Doyle, W. R. (2011). State spending on higher education: Testing the balance wheel over time. Journal of Education Finance, 36(4), 343–368.
DesJardins, S. L. (2001). Assessing the effects of changing institutional aid policy. Research in Higher Education, 42(6), 653–678.
Desrochers, D. M., & Wellman, J. V. (2011). Trends in college spending 1999–2009. Washington, DC: Delta Cost Project.
Dotterweich, D., & Baryla, E. A. (2005). Non-resident tuition and enrollment in higher education: Implications for tuition pricing. Education Economics, 13(4), 375–385.
Ehrenberg, R. G. (2006a). The perfect storm and the privatization of public higher education. Change, 38(1), 46–53.
Ehrenberg, R. G. (2006b). What’s happening to public higher education?. Westport, CT: Praeger Publishers.
Ehrenberg, R. G. (2012). American higher education in transition. Journal of Economic Perspectives, 26(1), 193–216.
Ehrenberg, R. G., & Sherman, D. R. (1984). Optimal financial aid policies for a selective university. Journal of Human Resources, 19(2), 202–230.
Emerson, R. M. (1962). Power-dependence relations. American Sociological Review, 27(1), 31–41.
Foundation, Carnegie. (2001). The Carnegie classification of institutions of higher education (2000th ed.). Menlo Park, CA: The Carnegie Foundation For The Advancement of Teaching.
Fries-Britt, S. L., & Turner, B. (2001). Facing stereotypes: A case study of Black students on a White campus. Journal of College Student Development, 42(5), 420–429.
Gerald, D., & Haycock, K. (2006). Engines of inequality: Diminishing equity in the nation’s premier public universities. Washington, DC: Education Trust.
Groen, J. A., & White, M. J. (2004). In-state versus out-of-state students: The divergence of interest between public universities and state governments. Journal of Public Economics, 88(9–10), 1793–1814.
Haycock, K., Mary, L., & Engle, J. (2010). Opportunity adrift: Our flagship universities are straying from their public mission. Washington, DC: Education Trust.
Heller, D. E. (2001). The states and public higher education policy: Affordability, access, and accountability. Baltimore, MD: Johns Hopkins University Press.
Heller, D. E. (2002). The policy shift in state financial aid programs. In J. C. Smart (Ed.), Higher education: Handbook of theory and research (Vol. 17, pp. 221–261). New York: Agathon Press.
Hillman, N. W., Tandberg, D. A., & Gross, J. P. K. (2014). Market-based higher education: Does Colorado’s voucher model improve higher education access and efficiency? Research in Higher Education, 55(6), 601–625.
Hoover, E., & Keller, J. (2011). More students migrate away from home. Chronicle of Higher Education, (October 30). Retrieved from http://chronicle.com/article/The-Cross-Country-Recruitment/129577/.
Hossler, D., & Bean, J. P. (1990). The strategic management of college enrollments. San Francisco, CA: Jossey-Bass.
Hossler, D., Braxton, J., & Coopersmith, G. (1989). Understanding college choice. In J. C. Smart (Ed.), Higher education: Handbook of theory and research (Vol. 5, pp. 231–288). New York: Agathon.
Hossler, D., & Gallagher, K. S. (1987). Studying student college choice: A three-phase model and the implications for policymakers. College and University, 62(3), 207–221.
Hossler, D., Lund, J. P., Ramin, J., Westfall, S., & Irish, S. (1997). State funding for higher education: The Sisyphean task. Journal of Higher Education, 68(2), 160–190.
Hossler, D., Schmit, J. L., & Vesper, N. (1999). Going to college: How social, economic, and educational factors influence the decisions students make. Baltimore, MD: Johns Hopkins University Press.
Hovey, H. A. (1999). State spending for higher education in the next decade: The battle to sustain current support. San Jose, CA: California State Policy Research Inc.
Hoxby, C. M. (1997). How the changing market structure of U.S. higher education explains college tuition (No. Working Paper 6323). Cambridge, MA: National Bureau of Economic Research.
Hoxby, C. M. (2009). The changing selectivity of American colleges. Journal of Economic Perspectives, 23(4), 95–118.
Hurlburt, S., & Kirshstein, R. J. (2012). Spending: Where does the money go? A delta data update, 2000–2010. Washington, DC: Association for Institutional Research.
Hurtado, S., & Ruiz, A. (2012). The climate for underrepresented groups and diversity on campus: HERI Research Brief. Higher Education Research Institute at UCLA.
Jaquette, O., Curs, B. R., & Posselt, J. R. (2014). Tuition rich, mission poor: Nonresident enrollment and the changing proportions of low-income and underrepresented minority students at public research universities. Unpublished manuscript.
Jaschik, S. (2009). Out-of-state dreams. Inside Higher Ed, (October 16). Retrieved from http://www.insidehighered.com/news/2009/10/16/outofstate.
Kane, T. J., Orszag, P. R., & Gunter, D. L. (2003). State fiscal constraints and higher education spending: The role of medicaid and the business cycle. Washington, DC: Brookings Institute.
Kirshstein, R. J. (2013). Rising tuition and diminishing state funding: An overview. Paper presented at the Journal of Collective Bargaining in the Academy.
Koshal, R. K., & Koshal, M. (2000). State appropriations and higher education tuition: What is the relationship. Education Economics, 8(1), 81–89.
Labaree, D. F. (1997). How to succeed in school without really learning: The credentials race in American education. New Haven, CT: Yale University Press.
Long, B. T. (2004a). How do financial aid policies affect colleges? The institutional impact of the Georgia HOPE scholarship. Journal of Human Resources, 39(4), 1045–1066.
Long, B. T. (2004b). How have college decisions changed over time? An application of the conditional logistic choice model. Journal of Econometrics, 121, 271–296.
Mak, J., & Moncur, J. E. T. (2003). Interstate migration of college freshmen. Annals of Regional Science, 37(4), 603–612.
McLendon, M. K., Hearn, J. C., & Mokher, C. G. (2009). Partisans, professionals, and power: The role of political factors in state higher education funding. Journal of Higher Education, 80(6), 686–713.
Mixon, F. G., & Hsing, Y. (1994). The determinants of out-of-state enrollments in higher education: A tobit analysis. Economics of Education Review, 13(4), 295–335.
Morgan, J. N. (1983). Tuition policy and the interstate migration of college students. Research in Higher Education, 19(2), 183–195.
Morphew, C. C., & Eckel, P. D. (2009). Privatizing the public university: Perspectives from across the academy. Baltimore: Johns Hopkins University Press.
National Conference of State Legislatures. (2012). Quick reference fiscal table. Retrieved from http://www.ncsl.org/research/fiscal-policy/basic-information-about-which-states-have-major-ta.aspx#fyrs.
NCES. (2013a). 2012-13 survey materials: Finance for degree granting public institutions using GASB reporting standards. Washington, DC: NCES.
NCES. (2013b). File documentation for the institutional characteristics data file, 2012–13. Washington, DC: NCES.
NCES. (2013c). IPEDS glossary. Retrieved June 22, 2013, from http://nces.ed.gov/ipeds/glossary/.
NCES. (2014). Digest of education statistics, 2013. Washington, DC: NCES.
Nicholson-Crotty, J., & Meier, K. J. (2003). Politics, structure, and public policy: The case of higher education. Educational Policy, 17(1), 80–97.
Okunade, A. A. (2004). What factors influence state appropriations for public higher education in the United States? Journal of Education Finance, 30(2), 123–138.
Oldfield, K. (2007). Humble and hopeful: Welcoming first-generation poor and working-class students to college. About Campus, 11(6), 2–12.
Orsuwan, M., & Heck, R. H. (2009). Merit-based student aid and freshman interstate college migration: Testing a dynamic model of policy change. Research in Higher Education, 50(1), 24–51.
Parsons, T. (1956). Suggestions for a sociological approach to the theory of organizations, part I. Administrative Science Quarterly, 1(1), 63–85.
Perna, L. W. (2006). Studying college access and choice: A proposed conceptual model. In J. C. Smart (Ed.), Higher education: Handbook of theory and research (Vol. 21, pp. 99–157). New York: Springer.
Pfeffer, J., & Salancik, G. R. (1974). Organizational decision making as a political process: The case of a university budget. Administrative Science Quarterly, 19(2), 135–151.
Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence perspective. New York: Harper & Row.
Posselt, J. R., Jaquette, O., Bielby, R., & Bastedo, M. N. (2012). Access without equity: Longitudinal analyses of institutional stratification by race and ethnicity, 1972–2004. American Educational Research Journal, 49(6), 1074–1111.
Priest, D. M., & St. John, E. P. (2006). Privatization and public universities. Bloomington: Indiana University Press.
Rizzo, M. J., & Ehrenberg, R. G. (2004). Resident and nonresident tuition and enrollment at flagship state universities. In C. M. Hoxby (Ed.), The economics of where to go, when to go, and how to pay for it. Chicago: University of Chicago Press.
Slaughter, S., & Leslie, L. L. (1997). Academic capitalism: politics, policies, and the entrepreneurial university. Baltimore: Johns Hopkins University Press.
Slaughter, S., & Rhoades, G. (2004). Academic capitalism and the new economy. Baltimore: Johns Hopkins University Press.
Smith, W. A., Allen, W. R., & Danley, L. L. (2007). “Assume the position… You fit the description”: Psychosocial experiences and racial battle fatigue among African American male college students. American Behavioral Scientist, 51(4), 551–578.
Tandberg, D. A., & Griffith, C. (2013). State support of higher education: Data, measures, findings, and directions for future research. In M. B. Paulsen (Ed.), Higher education: Handbook of theory and research (Vol. 28, pp. 613–685). Netherlands: Springer.
Toutkoushian, R. K., & Hillman, N. W. (2012). The impact of state appropriations and grants on access to higher education and outmigration. Review of Higher Education, 36(1), 51–90.
Toutkoushian, R. K., & Hollis, P. (1998). Using panel data to examine legislative demand for higher education. Education Economics, 6(2), 141–157.
Tuckman, H. P. (1970). Determinants of college student migration. Southern Economic Journal, 37(2), 184–189.
Waldorf, K. N. (2013, November 10). I came to Duke with an empty wallet. The Chronicle. Retrieved from http://www.dukechronicle.com/articles/2013/11/11/i-came-duke-empty-wallet.
Weerts, D. J., & Ronca, J. M. (2012). Understanding differences in state support for higher education across states, sectors, and institutions: A longitudinal study. Journal of Higher Education, 83(2), 155–+.
Winston, G. C. (1999). Subsidies, hierarchy and peers: The awkward economics of higher education. Journal of Economic Perspectives, 13(1), 13–36.
Winters, J. V. (2012). Cohort crowding and nonresident college enrollment. Economics of Education Review, 31(3), 30–40.
Zhang, L. A. (2007). Nonresident enrollment demand in public higher education: An analysis at national, state, and institutional levels. Review of Higher Education, 31(1), 1–25.
Zhang, L. A., Hu, S., & Sensenig, V. (2013). The effect of Florida’s Bright Futures program on college enrollment and degree production: An aggregated-level analysis. Research in Higher Education, 54(7), 746–764.
Zhang, L. A., & Ness, E. C. (2010). Does state merit-based aid stem brain drain? Educational Evaluation and Policy Analysis, 32(2), 143–165.
Zinth, K., & Smith, M. (2012). Tuition-setting authority for public colleges and universities. Education Commission of the States. Retrieved from http://www.ecs.org/clearinghouse/01/04/71/10471.pdf.
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.
About this article
Cite this article
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