High Technology and State Higher Education Policy

It is difficult to justify increased state government support for higher education using arguments based only on how higher education contributes to economic growth. The authors find no strong relationship between state funding of higher education and employment concentration in high-technology industries. Instead, they find that investment in public higher education will tend to be lower than justified on economic efficiency grounds because of the incentives for states to free ride off of the investments of other states. A challenge is to build advocacy strategies that take into account some of the realities of the relationship between public expenditures in higher education and economic growth, including the fact that the relationship is strongly influenced by the movement of educated workers across state borders. Other justifications for public higher education will have to be used, including the reduction of transaction costs for businesses in the state and the expansion of knowledge exchange.