Financing and Enrollments in Public Universities

State budget cuts have raised concerns about the disproportionate enrolment of out-of-state students. These students pay higher tuition fees at public universities. We investigate the decision-making of public universities about in-state and out-of-state enrolments by considering tuition rates as a financial incentive. We find that out-of-state enrolment is elastic, while in-state enrolment is relatively less elastic. Universities participating in reciprocity programs show that local student share is relatively insensitive to tuition changes; however, non-local student enrolments are more sensitive to these tuition changes. Overall, there is no evidence of the crowding-out effect on local student enrolment.