Price Regulation, Price Discrimination, and Equality of Opportunity in Higher Education: Evidence from Texas

Abstract

We assess the importance of price regulation and price discrimination to low-income students’ access to opportunities in public higher education. In 2003, Texas shifted tuition-setting authority away from the state legislature to public universities themselves. In response, most institutions raised sticker prices and many began charging more for high-earning majors, such as business and engineering. We find that poor students actually shifted toward higher earning programs following deregulation, relative to non-poor students. Deregulation facilitated more price discrimination through increased grant aid and enabled supply-side enhancements, which may have partially shielded poor students from higher sticker prices. (JEL D63, H75, I22, I23, I24, I28, I32)