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

85 Pages Posted: 5 Dec 2016

See all articles by Rodney Andrews

Rodney Andrews

University of Texas at Dallas

Kevin Stange

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy

Date Written: December 2016

Abstract

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 the governing board of each public university, most institutions raised sticker prices and many began charging more for high-return undergraduate majors, such as business and engineering. We use administrative data on Texas public university students from 2000 to 2009 matched to earnings records, financial aid, and new measures of tuition and resources at a program level to assess how deregulation affected the representation of disadvantaged students in high-return institutions and majors in the state. We find that poor students actually shifted towards higher-return programs following deregulation, relative to non-poor students. Deregulation facilitated more price discrimination by increasing grant aid for low-income students and also enabled supply-side enhancements such as more spending per student, which may have partially offset the detrimental effects of higher sticker price. The Texas experience suggests that providing institutions more autonomy over pricing and increasing sticker prices need not diminish the opportunities available to disadvantaged students.

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Suggested Citation

Andrews, Rodney and Stange, Kevin, Price Regulation, Price Discrimination, and Equality of Opportunity in Higher Education: Evidence from Texas (December 2016). NBER Working Paper No. w22901. Available at SSRN: https://ssrn.com/abstract=2880339

Rodney Andrews (Contact Author)

University of Texas at Dallas ( email )

Kevin Stange

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

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