Migration, Benefit Spillovers and State Support of Higher Education

This paper tests the hypothesis that benefit spillovers from public higher education—proxied by out-migration—led to lower higher education appropriations by state legislatures. A model addressing legislative appropriations, tuition and out-migration activity is developed and estimated. The results support the benefit spillover hypothesis, indicating that for each percentage point increase in out-migration, appropriations per student decline by $100. The results also reveal a bi-directional relationship between tuition and state appropriations. This is in contrast with the view that tuition is a 'residual' source of revenue representing the difference between the institutional budgets endorsed by educational policy-makers and the level of state appropriations.