State Support for Higher Education: A Political Economy Approach

This research examines state support for higher education by first ascertaining the amount supplied and demanded of this service. The approach assumes that supply and demand occur simultaneously, and that each is affected by higher education spending policies among the states. We argue that enrollment is the most satisfactory proxy for both supply and demand. State policy is measured as expenditure effort. We estimate three time-series equations using two-stage least squares regression with data for the years 1986–95. In the final equation, supply/demand (enrollment) emerges as the strongest predictor of state spending effort. Commitment to higher education (effort) is also especially sensitive to variations in the number of employees (per student). Employee costs clearly are a major factor in fueling increases in state higher education spending effort. State per capita income exerts a negative effect on the final dependent variable. Poor states exert greater financial effort in support of their colleges and universities than do more affluent states.