market rate tuition july 27, 2012 cohen hardin pan & tschirhart applied economic research group...
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![Page 1: Market Rate Tuition July 27, 2012 Cohen Hardin Pan & Tschirhart Applied Economic Research Group AER A Determination and Analysis for Florida State University](https://reader036.vdocument.in/reader036/viewer/2022062511/551c228e550346b24f8b5c9e/html5/thumbnails/1.jpg)
Market Rate Tuition
July 27, 2012
Cohen Hardin Pan & Tschirhart
Applied Economic Research Group
AER
A Determination and Analysis for Florida State University
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President Barron’s Requested Analysis
• Compute the market rate tuition• Undergraduate, in-state • Florida State University• 2011-2012 academic year
• Compute the net cost of tuition and fees• Before and after tuition change• Bright Futures, Prepaid
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Background
• Drastic cuts• FSU $65 million• No raises for 5 years
• Capped growth rate• Preeminence Bill removes cap
• Current tuition• $5,826
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What is a market rate?
Price
Quantity
D1
S1
PCURRENT
PMARKET
QDQS
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Determination & Analysis
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Estimation Methods
Solutions
Carnegie Classification
Hedonic Regression
• Average similar universities• Regression
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How do we estimate tuition?
• Select relevant market
Carnegie Classification
Hedonic Regression
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General SelectionProcess
Carnegie Classification
Hedonic Regression
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General MarketGeneral SelectionProcess
Carnegie Classification
Hedonic Regression
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Carnegie Foundation
• Classifies higher education institutions• Characteristics• Public, Private• Undergraduate population
• Used to control for institutional differences
Hedonic Regression
Carnegie Classification
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How do we estimate tuition?
• Select relevant market• Select standards for comparison
Hedonic Regression
Carnegie Classification
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Carnegie Selection
Hedonic Regression
Carnegie Classification
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How do we estimate tuition?
• Select relevant market• Select standards for comparison• Average the tuition
Hedonic Regression
Carnegie Classification
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Carnegie Estimates
Hedonic Regression
Carnegie Classification
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• Susceptible to outliers• Characteristics differ• Small sample sizes
Concerns with Averaging
Carnegie Classification
Hedonic Regression
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Hedonic Regression
• Vector of attributes for a good• Contributions to price
• Used to price housing• Bedrooms• Square footage• Lot Size
Carnegie Classification
Hedonic Regression
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How do we estimate tuition?
• Select relevant market• Select variables for regression
Carnegie Classification
Hedonic Regression
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Student-Teacher InteractionPrice
Quantity
D1
S1
D2
S2
Q1d
P1
P2
Q2d
Carnegie Classification
Hedonic Regression
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Student-Faculty Ratio
Carnegie Classification
Hedonic Regression
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Academic ReputationPrice
Quantity
D1
S1
D2
S2
Q1d
P1
P2
Q2d
Carnegie Classification
Hedonic Regression
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U.S. News Rankings
Carnegie Classification
Hedonic Regression
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What Affects Tuition?
Carnegie Classification
Hedonic Regression
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How do we estimate tuition?
• Select relevant market• Select variables for regression• Run the regression
Carnegie Classification
Hedonic Regression
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Regression Model
• External• Sum of all external revenues
• Rank• 1-29, 30-59, 60-89, etc.
• Undergraduate degrees• Balanced arts & sciences• Balanced professional + arts & sciences
Carnegie Classification
Hedonic Regression
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Variable Parameter Estimates T-Statisticstufac -0.0191** -2.44
lnstuserv 0.246*** 3.57
lnrb 0.185 0.96
lnexternal -0.180** -2.28
rank 1-29 0.213 1.26
rank 30-59 0.258* 1.93
rank 60-89 0.210* 1.73
rank 90-119 0.0536 0.45
rank 120-159 0.0277 0.22
rank 160-194 -0.107 -0.86
as high grad 0.00251 0.02
asp high grad -0.018 -0.26
pas some grad 0.00191 0.01
pas high grad -0.0689 -1.11
Constant 7.781*** 3.74
*** p<0.01, ** p<0.05, * p<0.1
70 Public Universities
R2
0.644
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Student-Faculty Drives Tuition
Negative Positive
Carnegie Classification
Hedonic Regression
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Estimated Tuition
Carnegie Classification
Hedonic Regression
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Determination & Analysis
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Declining Tuition Coverage
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Bright Futures
Prepaid
Bright Futures & Prepaid Interaction
4 Year Univ.
FAS
FMSGSV
4 Year College 2 Year
2+2
10%
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Students with Bright Futures & Prepaid
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Costs Remain Zero for 34%
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Costs Increase by Less Than $2,000
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Determination & Analysis
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Forecasted Recommendations
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$0 - $5,501 One-time Increase$7,781
Determination & Analysis
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Cohen Hardin Pan &Tschirhart
Cohen Hardin Pan &Tschirhart
Applied Economic Research GroupApplied Economic Research Group
AER AER