Working Paper
On Expanding Public Funding of Selective Colleges
Abstract: As college attainment expanded in the U.S., the fraction of public funds allocated to selective colleges and universities declined. Does this make sense from an efficiency standpoint, given that the majority of college entrants face the highest financial returns at selective colleges? Should the states instead be expanding access to high quality colleges? In this paper, we examine reallocating public funds from low quality to high quality colleges in a spending-neutral way. We find that this policy leads to a decline in aggregate earnings and intergenerational income mobility. Public spending on lower quality schools is well-justified.
JEL Classification: J24; J31; I23; I26; H21; H22;
https://doi.org/10.20955/wp.2025.011
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Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2025-03-20
Number: 2025-011