The Functions and Dysfunctions of College Rankings: An Analysis of Institutional Expenditure

College rankings have become a powerful influence in higher education. While the determinants of educational quality are not clearly defined, college rankings designate an institution's standing in a numerical order based on quantifiable measurements that focus primarily on institutional resources. Previous research has identified the "functions" of rankings: higher ranking positions benefit institutions via admissions outcomes, resource attainment, and future reputation. On the other hand, this positive association between rankings and resource attainment has increased concerns among higher education community about "dysfunctions" of rankings. Rankings may encourage colleges and universities to spend more, moving resources from educational activities to research, amenities and facilities, and administrative expenditures. Filling the gap in the literature in empirically evaluating this hypothesis, this study examined the effect of ranking systems on resource allocation using U.S. News and World Report's Best Colleges rankings. The numerical ranking resulted in an expansion in both educational and noneducational activities expenditures, including the escalation of student and academic services expenditures. Instruction expenditure was the major area in which institutions altered resource allocation in response to the distinctive nature of ranking systems, the numerical rankings and arbitrary groupings. These patterns were manifested differently among schools categorized as National Universities and those categorized as National Liberal Arts Colleges. The findings from this study provide important implications for understanding the role of college rankings that reinforce the resource-based view of institutional quality and institutional responses, as well as its ramifications to the missions of higher education.