This paper investigates whether and how college quality rankings affect a key factor in the ranks measure of quality -- financial resources per student -- for public colleges. We show that when a public college is exogenously included in the U.S. News & World Report rankings educational and general expenditure per student increase by 3.2%. To fund the additional expenditure, state appropriations per student increase by 3.4 to 6.8%, while tuition is not responsive at all.
The state appropriation response may be realized in two potential channels: on the one hand, U.S. News rankings may allocate additional citizen attention to the issue of public college quality, and the increased attention steers more funding towards public colleges. On the other hand, college rankings may provide new information in addition to existing college guides. As the college quality beliefs of citizens are updated state governments may adjust funding accordingly. We find evidence in support of the first explanation.
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This paper was revised on August 12, 2008
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