Incremental State Higher Education Expenditures (Original PAPER‪)‬

Introduction This study analyzes various measures of state expenditures on higher education using a panel of data from 45 states for the years 1986 through 2005. (1) Results of panel stationarity tests indicate that each measure of state higher education spending is non stationary. Specifically, each series contains a unit root. It is shown that a unit root in higher education spending is consistent with the incremental model of government spending. The incremental theory argues that current expenditures on a government program are equal to expenditures in the previous period plus a marginal adjustment for changes in some set of economic, demographic, or political factors. To avoid problems associated with the use of non-stationary dependent variables in regression analysis, all measures of state higher education expenditures are differenced to induce stationarity. Panel regressions then are used to identify factors that significantly explain annual increments or changes in state higher education spending.