Munich Personal RePEc Archive

State funding for public higher education: explaining the great retreat

Stone, Joe (2012): State funding for public higher education: explaining the great retreat.

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Abstract

This study examines reasons for the decline in state funding for public higher education. Prior studies point to Medicaid costs, limitations on tax revenues, income inequality, and Pell grants, but do not estimate their relative importance. Results in this study indicate that income inequality, Pell grants, and K-12 funding are the dominant factors. Pell grants in particular, create powerful incentives for states to substitute Federal dollars for their own. Estimates are identified using 5-year difference-in-differences for 49 states from 1957 to 2007. Regression, instrumental-variables, and Granger-causality estimates yield consistent results.

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