Financial resources, regulation, and enrollment in US public higher education

While total financial resources for higher education have been rising, there has been a significant shift in the share of resources coming from tuition and fees and a decline in the share coming from state appropriations. We seek to understand the enrollment consequences of this shift and to explore policy options using the results of a two-stage least-squares model of the demand for and supply of enrollment in public higher education. We estimate the model using 1990-95 data for the 48 continental US states. Tuition, average wage levels, and average education levels significantly affect enrollment demand, while state appropriations, other revenue, number of institutions, and the level of regulation significantly affect enrollment supply. Our simulations of policy options illustrate the difficulty of maintaining enrollment levels in the face of tuition increases. If tuition continues to rise, states are faced with reducing supply through lower state appropriations, or attempting to maintain cur-rent supply by increasing the amount of regulation in higher education. (C) 2002 Elsevier Science Ltd. All rights reserved.