Educational Subsidies Vary State to State

It's understandable that people will stay in Texas because of the good job availability,  and why they stay in California, the weather is always good and the free stuff is even better.

Generous Education Subsidies Increase College Enrollments
Source: John Kennan, "Spatial Variation in Higher Education Financing and the Supply of College Graduates," National Bureau of Economic Research, April 2015.

May 14, 2015

Throughout the United States, there are large differences in both the amount of money spent on college education subsidies and the proportion of college graduates in the labor force. Most state subsidies were created to increase the number of educated workers in the labor force due to the perceived benefits of a more educated workforce. What are those differences?

Across states, there is significant variance in the proportion of those born in each state who have a college education and in the proportion of those working in the state who have a college education. There are also big differences in the number of college graduates who stay in the state where they were born. On average, about 45 percent of all college graduates ages 25-50 work in the State where they were born, but this figure is above 65 percent for Texas and California, and is below 25 percent for Alaska and Wyoming.

One possible explanation for the pattern in the proportion of college graduates across states is that the pattern follows the proportion of college graduates in the parents' generation. This would make sense due to the strong relationship between the education levels of parents and children. The data also indicate there are strong economic incentives to migrate from low-wage to high-wage locations.