Cohort crowding: how resources affect collegiate attainment

Cohort Crowding: How Resources Affect Collegiate AttainmentAnalyses of college enrollment and college completion rates typically focus on demandsidefactors including the financial attractiveness of a college education and the availability offinancial aid. Implicit in this line of research is the assumption that colleges and universitiesadjust supply fully with changes in demand. However, there is good reason to believe that supplyis not even close to perfectly elastic. The higher education market in the United States isdominated by public and non-profit production, and colleges and universities receive considerablesubsidies from state, federal, and private sources. Indeed, Winston (1999) estimates that studentfees cover only about 12% percent of total educational costs at public colleges and universities inthe U.S. Parallel estimates of the average share of costs covered by student tuition and fees atprivate colleges and universities are substantially higher, but still less than 50%, and much lowerat the most selective institutions. Because consumers pay only a fraction of the cost ofproduction, changes in demand are unlikely to be accommodated fully by colleges anduniversities without commensurate increases in non-tuition revenue. For this reason, publicinvestment in higher education plays a crucial role in determining the degrees produced and thesupply of college-educated workers to the labor market.Because only part of any observed change in current expenditures is likely to beexogenous and expenditures translate to resources with long lags, direct assessment of the effectof resources per student on degree outcomes using measures of current expenditures or stateappropriations is difficult. As an alternative, we focus the effects of “crowding out” brought aboutby relatively large cohorts vying for a limited number of spaces in the higher education sector.Increases in the college-age population shift out the higher education demand function. Yet, in theabsence of complete per capita adjustment in educational subsidies, increasing enrollment islikely to reduce educational resources per student in aggregate. In this circumstance – when anincrease in cohort size does not produce a proportionate increase in resources – large cohorts areessentially crowded out of the higher education sector, affecting educational attainment. To thisend, variation in cohort size leads to an indirect test of how the availability of resources at thecollege and university level affects collegiate attainment.We are not the first to note that within-state growth in cohort size is negatively related tocollegiate attainment. Card and Lemieux (2000) have found similar results using Census andCPS data. The innovation of our research is in the analysis of possible mechanisms leading toreductions in college completion among large cohorts. We present what we believe to becompelling evidence that limited adjustment among colleges and universities on the supply-sideof the higher education market is what causes the crowding out of large cohorts. The negative2