Discover Quality Change of U.S Postsecondary Institutions from 1990 to 2010 (testing result)

     In this section I discuss testing results of four different postsecondary institutions. In terms of the testing, dependent variable is total expenditure, while independent variables are function expenditure like instruction and student services.

      For private research institutions, table 17 tabulates test results for private research institutions. Column 1 shows that holding other variables unchanged, increasing instruction expenditure by one dollar tends to increase expenditure by 1.37 dollar. As for research expenditure, the influence is 0.97 dollar. The coefficient of instruction indicates that instruction spending has an economically significant impact upon total expenditure. If spending on instruction is efficient, then it means these institutions have experienced a certain amount of quality increase. One thing interesting in this testing is that coefficient of grant expenditure is negative, indicating that spending more on scholarships and fellowships alone actually decrease total expenditure. The sign of the coefficient depends on how institutions do their budgeting. If institutions do zero-based budgeting, namely that they come up with a number to spend on each category and implement it, then spending more on each subcategory is bound to increase total expenditure. However, if institutions first set an overall expenditure and then allocate to each category based on revenue sources and donors’ specific requirements, it is reasonable to see negative coefficient.

      Considering that many private research institutions have affiliated hospitals, I further decomposed samples into two subgroups and tested difference with respect to instruction and research expenditure. Column 2 and 3 tabulate the testing results. The results show that institutions without hospitals have more quality increase in terms of instruction while institutions with affiliated hospitals have more quality improvement in research.

      As for public research institutions (Table 19), since coefficients of instruction and research are both bigger than 1, it implies that these institutions experienced quality increase from both instruction investment and research effort. Column 2 and 3 illustrate results for institutions with and without hospitals. We can see that hospital-affiliated institutions, compared to peers without one, have more quality return from research and less from instruction. I think that existence of affiliated hospitals tends to let schools have different spending decisions, and the possible reason is that: schools with hospital have more research projects related to medicine, and thus they are more likely to get results and explore frontier of knowledge in terms of this field of researches. As a result, they attract more talented students and faculties interested in this field and their quality contribution in terms of research is more significant than peers without hospitals.

      As for private bachelor institutions, their coefficient of instruction is larger than 1, which implies that they also experienced certain level of quality increase. One thing to notice is that, even though their coefficient of research is larger than 1 (though not much), this doesn’t mean that they gain extra quality increase from this field because their investments in research are very small.

      For community colleges, holding other variables constant, increasing instruction expenditure by 1 dollar will cause total expenditure to rise by 0.97 dollar, and since these institutions are not research oriented, their research coefficient doesn’t tell much about their quality change. Direct expenditure on instruction doesn't lead to economically significant increase of total expenditure, and this implies that with respect to public associate institutions, they didn’t experience much quality improvement over years.