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Government free riding in the public provision of higher education: panel data estimates of possible crowding out

2011; Taylor & Francis; Volume: 44; Issue: 9 Linguagem: Inglês

10.1080/00036846.2010.537641

1466-4283

G. Thomas Sav,

Higher Education Research Studies

Abstract This article employs panel data on more than 1000 US public colleges and universities to investigate the effect of private giving on state government funding. Government free riding is at question and is found to be active in that private donations partially displace state government funding at the rate of 83 cents on the dollar. That compares to the 45 cents political substitution of the 1960s but is much diminished from the $1.07 of the 1980s. Those are aggregate comparisons for all public institutions. A disaggregated approach in this article additionally reveals that doctoral granting research universities are somewhat lesser victims of crowd out in experiencing a 71 cents cut. At master level colleges and universities and associate 2 year degree granting colleges, crowding out is estimated to be on the order 87 cents and $1.10, respectively. Relative to the academic year 2000 to 2001, publicly controlled colleges and universities are found to experience significant reductions in state appropriated funding in 2003 to 2004 and 2006 to 2007. Even accounting for changes in the business cycle and changes in possible government spending priorities over time, the overall findings support the persistent effect of this brand of crowding out. Notes 1 One could pick up just about any issue of the Chronicle of Higher Education for articles on higher education funding, enrolments and the like. Pertaining to this article, for example, is the Chronicle of Higher Education (Citation2007) article on ‘Private Giving’. 2 Other studies have scrutinized higher education under the crowding out proposition, but in the much narrower context of internal resource allocations and the fungibility of institutional dollars. Ehrenberg et al. (Citation1993) found that federal funding of graduate education partially crowded out internal funding in doctoral granting universities. Connolly (Citation1997) found that external government research funding caused an increase in internal research support. That crowding-in is also a finding of Payne (Citation2001) but pertains to increased private rather than government research giving that increases externally provided federal research support in research universities. 3 Both Peltzman (Citation1973) and Becker and Lindsay (Citation1994) do provide separate group estimates for public and private schools but find the absence of any significant relationship between government support and private donations among the latter. It is admitted that the lack of any correlation is likely due to the very small and usually absent state funding presence in the private sector. 4 In 1988, IPEDS replaced the former National Center for Education Statistics data used by Becker and Lindsay. IPEDS requires separate reporting by all colleges and universities where as previously data were combined for parent and child institutions, i.e. main campus data were combined with all branch campuses. If the latter receive differential private or state funding, then the Becker and Lindsay estimates could be biased. Using IPEDS that problem is currently avoided. Also, Becker and Lindsay arbitrarily eliminated colleges receiving less than $50 000 in private support. Here, we include those institutions. 5 The Carnegie Classification Codes have undergone changes over time and most recently beginning in the year 2000, making earlier comparisons more difficult. In this article, doctoral combines the two levels of Carnegie Doctoral/Research Universities, master combines both the Carnegie Master's Colleges and Universities I and II levels, bachelor combines both Baccalaureate Colleges – Liberal Arts and – General levels, and associate is a combination of Baccalaureate/Associate's Colleges and Associate's Colleges. The eight classifications are collapsed into four levels based on the fact that, for the purposes at hand, the very slight differences in missions cannot be reasonably quantified. There have also been significant changes in financial accounting requirements that have made inter-institutional comparisons of post- and pre-2000 academic years problematic. Those changes began in 1997 and were phased in over several years. In fact, at the time of this research, the financial IPEDS data were unavailable for the years 1997 through 1999.