Nonresident enrollment demand in public higher education.

Abstract

The purpose of this study was to investigate the impact of changes in nonresident tuition on nonresident enrollment and tuition revenue in American public four-year colleges and universities. The economic framework used to examine this relationship was the human capital investment model, which assumed a two-stage model of student choice. The analysis calculated a price elasticity coefficient and a student price response coefficient for nonresident first-time freshmen in three institutional classifications (i.e., doctoral-granting universities, comprehensive universities, and baccalaureate institutions) and for all institutions combined. Nine institutional, economic, and demographic variables were regressed on the dependent variable--a ratio of probabilities of nonresident enrollment to resident enrollment. The regression equations were estimated in double-log functional form utilizing ordinary least squares procedures. The student data used in the study were Fall 1986 first-time freshmen enrolled in 435 public four-year institutions. The major findings of the study include: (1) The price elasticity of demand with respect to nonresident tuition for all institutions in the study was estimated to be -0.60. The student price response coefficient (SPRC) for a $100 change in tuition was calculated to be -1.69 percent. (2) The price elasticity of demand for baccalaureate institutions was estimated to be negative unitary elastic (i.e., -1.00). The baccalaureate SPRC was calculated to be -3.2 percent. (3) Nonresident enrollment demand was positively associated with migration patterns of the nonstudent population, employment rate in the destination state, and home state per capita income. In summary, nonresident students in the average public four-year college or university are only moderately sensitive to changes in price. Nonresident tuition increases in the public sector will cause relatively small declines in enrollment and will be accompanied by increased tuition revenue. Students at baccalaureate institutions are more sensitive to changes in price; tuition increases in these institutions will result in larger declines in enrollment and will have no impact on tuition revenue. Institutional officials and state policy makers should be aware of these results when considering the impact of changes in tuition on nonresident enrollment and institutional revenues.