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This study uses panel data to examine the direct link between state funding and graduation rates at four-year public institutions. When other factors are held constant, a $1,000 increase in state appropriations per FTE student at four-year public institutions is associated with about a one percentage point increase in graduation rates. This positive link appears to hold for all research/doctoral, masters, and baccalaureate institutions. In addition, there is evidence that modest increases (or a decrease) in state funding are associated with rapid increases in tuition rates charged at four-year public institutions, which likely result in an additional negative impact on graduation rates. Simply put, there is no such a thing as free lunch when it comes to graduation rates at public higher education institutions.


Suggested Citation
Zhang, L. (2006). Does public funding for higher education matter? [Electronic version]. Retrieved [insert date], from Cornell University, School of Industrial and Labor Relations site:

Required Publisher Statement
Published by the Cornell Higher Education Research Institute, Cornell University.