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Valuing the benefits of the education provided by public universities: A case study of Minnesota

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  • Damon, Amy
  • Glewwe, Paul

Abstract

This study estimates the value of the private and public benefits that accrue to Minnesota residents from state government subsidies to higher education. In 2005, the University of Minnesota and the Minnesota State Colleges and Universities system received $832 million from Minnesota's state government to support educational programs. These subsidies allow these institutions to offer lower tuition rates, increasing the number of Minnesotans with bachelor and graduate degrees. We calculate that removing these subsidies would eventually lead to 14,000 fewer graduate degree holders in Minnesota, and reduce those with bachelor's degrees or “some college” by 42,000. The annual economic cost of these subsidies is about $326 million; this is less than annual state appropriations because most of those appropriations are income transfers from taxpayers to students, not an economic cost. We estimate that the annual value of the benefits of these subsidies is between $531 and $786 million ($381 and $570 million) when a 3% (5%) discount rate is used. We also discuss some of the income distribution consequences.

Suggested Citation

  • Damon, Amy & Glewwe, Paul, 2011. "Valuing the benefits of the education provided by public universities: A case study of Minnesota," Economics of Education Review, Elsevier, vol. 30(6), pages 1242-1261.
    • Handle: RePEc:eee:ecoedu:v:30:y:2011:i:6:p:1242-1261
    DOI: 10.1016/j.econedurev.2011.07.015
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    Cited by:

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    2. Gary Fethke, 2017. "Efficiency And Equity Implications Of Charging Nonresidents Full-Cost Tuitions," Contemporary Economic Policy, Western Economic Association International, vol. 35(4), pages 603-614, October.
    3. Nicholas Lawson, 2014. "Liquidity Constraints, Fiscal Externalities and Optimal Tuition Subsidies Optimal College Tuition Subsidies," AMSE Working Papers 1404, Aix-Marseille School of Economics, France, revised 18 Mar 2014.
    4. Burer, Samuel & Fethke, Gary, 2016. "Nearly-efficient tuitions and subsidies in American public higher education," Economics of Education Review, Elsevier, vol. 55(C), pages 182-197.
    5. Nicholas Lawson, 2017. "Liquidity Constraints, Fiscal Externalities, and Optimal Tuition Subsidies," American Economic Journal: Economic Policy, American Economic Association, vol. 9(4), pages 313-343, November.
    6. Gary T. Henry & Kevin C. Bastian & C. Kevin Fortner & David C. Kershaw & Kelly M. Purtell & Charles L. Thompson & Rebecca A. Zulli, 2014. "Teacher Preparation Policies and Their Effects on Student Achievement," Education Finance and Policy, MIT Press, vol. 9(3), pages 264-303, July.
    7. Ortega, Alberto, 2020. "State partisanship and higher education," Economics of Education Review, Elsevier, vol. 76(C).
    8. Andreea Mirica, 2014. "Higher Education – A Solution To Unemployment? Case Study: Romania," Romanian Statistical Review, Romanian Statistical Review, vol. 62(3), pages 63-75, September.

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    More about this item

    Keywords

    Higher education subsidies; Cost–benefit analysis; Social benefits; Distributional impacts; Minnesota;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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