The Morning Economic Report
5:30 am
Thu March 13, 2014

Graduation Rates - 3/13/14

An analysis conducted by John Bound of the University of Michigan and Sarah Turner at the University of Virginia tracks college education through the latter half of the 20th century.  The two analysts found that when states are home to large college age populations, public spending per student declines and graduation rates suffer.  In other words, when there are many young people between the ages of 18 and 22, investment in each student falls. 

This analysis is consistent with the earlier work of David Card and Thomas Lemieux, who also determined that as the college age population rises, the college enrollment rate falls.  This indicates a degree of rationing in the supply of higher education according to writer Eduardo Porter.  Slipping college attendance and graduation rates in turn handicap the U.S. economy by impacting everything from technological progress to income inequality. 

Professors Card and Lemieux suggest that declining college graduation rates explain to a significant extent the rapid growth in income inequality.  In California for instance, state appropriations per college age person declined during the 1980s, tuition rose, enrollment rates fell and wage gaps widened during the ensuing decade.