ERIC Number: ED476892
Record Type: Non-Journal
Publication Date: 2003-Apr
Reference Count: N/A
In-State versus Out-of-State Students: The Divergence of Interest between Public Universities and State Governments. NBER Working Paper Series.
Groen, Jeffrey A.; White, Michelle J.
This study examined the divergence of interest between universities and state governments concerning standards for admitting in-state versus out-of-state students. States have an interest in using universities to attract and retain high ability individuals because they pay higher taxes and contribute more to economic development. In contrast, universities have an interest in the success of their graduates, but little interest in where they come from, or where they go after graduation. This study developed and tested a model to illustrate the divergence of interest between universities and their states. It was found that public universities set lower minimum admissions standards for in-state than out-of-state applicants, presumably following their states' preferences, while private universities, on average, treat both groups equally. However, the study found that states in fact gain financially when public universities admit additional out-of-state students. This is because attending a public university in a particular state increases the probability of marginal students locating in the state after graduation by the same amount whether students are from in-state or out-of-state. Because marginal out-of-state students earn more, their expected future state tax payments are higher. Findings also show that higher ability students tend to be at least as strongly influenced in their adult location choices by where they attend university as are middle and low ability students. Since high ability students earn more, this suggests that states gain financially when their universities attract high ability students, regardless of whether they are from in-state or out-of-state or the universities are public or private. Results suggest a rationale for public support of flagship public universities that can attract high-ability students. An appendix contains four data tables. (Contains 1 figure, 5 tables, and 17 references.) (Author/SLD)
Publication Type: Reports - Research
Education Level: N/A
Authoring Institution: National Bureau of Economic Research, Cambridge, MA.