Abstract This paper examines how changes in state funding for higher education impact the share of minority students at public postsecondary institutions in the U.S. To isolate a causal relationship between state funding and minority student representation, I use a shift-share instrumental variable approach that combines variations in state-level funding with an institution’s reliance on state appropriations at baseline. The results suggest that state appropriation cuts decrease the diversity of incoming students; Hispanic student enrollment is particularly sensitive to funding levels. I provide evidence of potential mechanisms driving this relationship: lower appropriations are associated with increases in posted tuition and fees, the cost of attendance net of grant aid, and student borrowing rates.
Dora Gicheva (Wed,) studied this question.