The Impact of Price Caps and Spending Cuts on U.S. Postsecondary Attainment

40 Pages Posted: 28 Aug 2017

See all articles by David Deming

David Deming

Harvard University; Harvard University - Harvard Kennedy School (HKS)

Christopher Walters

University of California, Berkeley - Department of Economics

Date Written: August 2017

Abstract

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.

Suggested Citation

Deming, David and Walters, Christopher, The Impact of Price Caps and Spending Cuts on U.S. Postsecondary Attainment (August 2017). NBER Working Paper No. w23736. Available at SSRN: https://ssrn.com/abstract=3027840

David Deming (Contact Author)

Harvard University ( email )

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Christopher Walters

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

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