Crowded Colleges and College Crowd-Out: The Impact of Public Subsidies on the Two-Year College Market

Abstract

This study assesses the impact of an increase in funding for public community colleges on the market for two-year college education, considering both the effect on community college enrollments and on the number of proprietary schools in a market. I draw on a new administrative dataset of for-profit colleges in California and votes on local community college bond referenda to implement a unique regression discontinuity design. The results suggest that bond passage diverts students from the private to the public sector and causes a corresponding decline in the number of proprietary schools in the market. (JEL H75, I22, I23)

The Effect of Shocks to College Revenues on For-profit Enrollment: Spillover from the Public Sector

“…These models can overwhelm our statistical power due to the state-level analysis over just 11 years of data in each case. Upon inspection, there is little variation in for-profit market share once we impose statespecific trends, which coincides with other work suggesting that proprietary institutions are selfpropagating once they draw a critical mass of students to fund their existence (Cellini, 2009). …”

“…There is existing evidence that for-profits schools compete with public sector community colleges for students, with studies focusing separately on the supply and demand sides of the market (Cellini, 2009;Chung, 2012). In addition, a separate strand of research has evinced substantially decreases in attendance rates brought about by larger-than-usual cohorts and prices in the public sector (Bound and Turner, 2007;Fortin, 2005).…”

The labor market returns to a for-profit college education

“…It may be the case that students are unaware of the options available at local community colleges (Cellini, 2009) and we cannot rule out that aggressive recruiters in the private sector might mislead students into believing that the earnings gains will be higher than in the public sector (United States Government Accountability Office (GAO), 2010). On the other hand, students may simply value other attributes of for-profit colleges.…”

“…Cellini (2009) shows that forprofits and community colleges compete for students: when funding for community colleges increases, for-profit colleges exit the market. Similarly, Chung (2012) finds that community college tuition positively impacts the probability of attending a for-profit college.…”

“…Similarly, Chung (2012) finds that community college tuition positively impacts the probability of attending a for-profit college. Both sectors also offer a wide range of overlapping degree programs (Cellini, 2009), but community colleges tend to offer more academic and liberal arts programs and for-profits often specialize in vocational fields in which skills are easy to verify and physical plant requirements are modest (Turner, 2006, chap. 3).…”