New paper on state tuition walls

I have seen this paper presented twice and really like it. It suggests that the welfare losses due to tuition differentials between in-state and out-of-state students are non-trivial. Seems like it is trade barriers like this that the commerce clause was supposed to prevent.

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The Out-of-State Tuition Distortion

Brian G. Knight, Nathan M. Schiff

NBER Working Paper No. 22996
Issued in December 2016

Public universities in the United States typically charge much higher tuition to non-residents. Perhaps due, at least in part, to these differences in tuition, roughly 75 percent of students nationwide attend in-state institutions. While distinguishing between residents and non-residents is consistent with welfare maximization by state governments, it may lead to economic inefficiencies from a national perspective, with potential welfare gains associated with reducing the gap between in-state and out-of-state tuition. We first formalize this idea in a simple model. While a social planner maximizing national welfare does not distinguish between residents and non-residents, state governments set higher tuition for non-residents. The welfare gains from reducing this tuition gap can be characterized by a sufficient statistic relating out-of-state enrollment to the tuition gap. We then estimate this sufficient statistic via a border discontinuity design using data on the geographic distribution of student residences by institution.

Link to paper at NBER.