« Back to Results

The Supply Side of Higher Education: University Choices and the Implications for Students

Paper Session

Saturday, Jan. 6, 2018 10:15 AM - 12:15 PM

Pennsylvania Convention Center, 109-A
Hosted By: American Economic Association
  • Chair: Sarah E. Turner, University of Virginia

Price Regulation, Price Discrimination, and Equality of Opportunity in Higher Education: Evidence From Texas

Rodney Andrews
University of Texas-Dallas and NBER
Kevin Stange
University of Michigan and NBER


This paper assesses the importance of price regulation and price discrimination to low-income students’ access to opportunities in public higher education. Following a policy change in the state of Texas that shifted tuition-setting authority away from the state legislature to public universities themselves, most institutions raised sticker prices and many began charging more for high-return majors, such as business and engineering. We find that poor students actually shifted towards higher-return programs following deregulation, relative to non-poor students. Deregulation facilitated more price discrimination and also enabled supply-side enhancements, which may have partially offset detrimental effects of higher sticker prices.

What Do Course Offerings Reveal About University Preferences?

James Thomas
Yale University


This paper develops a method for inferring a university's preferences for the type of courses students choose and the utility students derive from these choices. The method is based on the idea that offering an additional course in a specific field presents a direct cost to a university, makes that field more attractive to students, and increases student utility. A university which only values student utility offers courses so that the marginal effect per dollar of offering an additional course is the same across all fields. I show that differences in these marginal effects per dollar can be used to quantify a university's willingness to sacrifice student utility in order to draw more students into certain fields. I apply my method to the introductory course offerings at University of Central Arkansas (UCA) and find that UCA is willing to sacrifice student utility to draw students out of humanities and arts courses and into STEM courses. To quantify the university's trade-off, I show that a 16.6% increase in the cost of offering a STEM course and a 13.2% decrease in the cost of offering a humanities or arts course would induce UCA to offer courses which maximize student utility.

Where Do Students Go When For-profit Colleges Lose Federal Aid?

Stephanie R. Cellini
George Washington University and NBER
Rajeev Darolia
University of Missouri
Lesley J. Turner
University of Maryland and NBER


Recent federal investigations and new regulations have resulted in restrictions on for-profit institutions’ access to federal student aid. We examine the enrollment effects of similar restrictions imposed on over 1,200 for-profit colleges in the 1990s. Using variation in regulations linked to student loan default rates, we estimate the impact of the loss of federal aid on the enrollment of Pell Grant recipients in sanctioned institutions and their local competitors. Enrollment in a sanctioned for-profit college declines by 53 percent in the five years following a sanction. For-profit sanctions result in negative spillovers on unsanctioned competitor for-profit colleges in the same county, which experience modest enrollment declines. These enrollment losses in the for-profit sector are offset by gains in enrollment in local community colleges, suggesting that the loss of federal student aid for poor-performing for-profit colleges does not reduce overall college-going but instead shifts students across higher education sectors. Finally, we provide suggestive evidence that students induced to enroll in community colleges following a for-profit competitor’s sanction are less likely to default on their federal loans.

The Impacts of Price Caps and Spending Cuts on US Postsecondary Attainment

David J. Deming
Harvard University and NBER
Christopher R. Walters
University of California-Berkeley and NBER


Increasing the postsecondary attainment rate of college-age youth is an important economic
priority in the U.S. and in other developed countries. Yet little is known about whether different
forms of public subsidy can increase degree completion. In this paper, we compare the impact of
the marginal taxpayer dollar on postsecondary attainment when it is spent on lowering tuition
prices versus increasing the quality of the college experience. We do so by estimating the causal
impact of changes in tuition and spending on enrollment and degree completion in U.S. public
postsecondary institutions between 1990 and 2013. We estimate these impacts using a newly
assembled data set of legislative tuition caps and freezes, combined with variation in exposure to
state budget shocks that is driven by differences in historical reliance on state appropriations. We
find large impacts of spending on enrollment and degree completion. In contrast, we find no
impact of price changes. Our estimates suggest that spending increases are more effective per dollar than price cuts as a means of increasing postsecondary attainment.
Mary Ann Bronson
Georgetown University
Michael Dinerstein
University of Chicago
Richard K. Mansfield
University of Colorado
Christopher Neilson
Princeton University
JEL Classifications
  • I2 - Education and Research Institutions