The Effect of Large Unconditional Donations to Institutions of Higher Education

• In Event: Unpacking the Black Box of Institutional Quality in Higher Education

Abstract

Although the share of the population enrolling in institutions of higher education (IHEs) in the US has grown immensely since the 1990s, the share who complete a degree or credential has not grown nearly as much (Lovenheim and Smith 2023). However, there is causal evidence that students who attend "higher quality" institutions are more likely to graduate and earn more, where quality is often defined as an IHE being more selective, having higher per student spending, or being a four-year or flagship school (see for example Cohodes and Goodman 2014 or Hoekstra 2009). Still, quality is an ambiguous term and the exact ingredients that lead an institution to increase student graduation rates or labor market outcomes are only beginning to be understood (Mountjoy and Hickman 2021). This paper uses a difference-in-differences design to examine the impact of unanticipated, unconditional donations to over 50 IHEs across 29 states between 2020 and 2021, averaging just over 2 million dollars each. The data come from MacKenzie Scott's Yield Giving website which documents the timing and amount of her donations and identifies the organizations she donated to. Ms. Scott disproportionately targeted her donations to public, minority-serving instutions, particularly historically Black colleges and universities. We match the records of Ms. Scott's donations to the Integrated Postsecondary Education Data System (IPEDS) to gather information on IHE's characteristics, finances (including assets, endowments, and expenditures) as well as student outcomes at these institutions. The IHEs who received donations tended to be of small or medium size and had little to no research intensity. According to the Carnegie Student Access and Earnings Classification, about 34% were opportunity colleges and universities, with higher access and higher earnings among graduates.  The study finds that two-year and four-year schools responded very differently to these donations. In particular, four-year schools saw a large jump in their endowment and no identifiable impact on spending. These results suggest that large unconditional donations may not yield short-run impacts on student outcomes, but rather may help institutions set themselves up for longer-run sustainability by giving them the ability to make investments in their future financial security. Given the targeted nature of these donations, this implies that even substantially large donations may not be an effective avenue for increasing the diversity of college graduates in the short run. This work is ongoing and preliminary. Further work is needed to understand the spending response of two-year schools and the implications for IHE sustainability. The stability of small to medium, tuition-dependent IHEs such as those in this study is more important than ever as these colleges expect to be especially affected by the anticipated decrease in the cohort sizes of graduating high school seniors in the future.

Authors

• Silvia Robles, Brown University
  Presenting Author

• Aizat Nurshatayeva, Brown University
  Non-Presenting Co-Author

• Anjali Pai, Brown University
  Non-Presenting Co-Author

• Annaliese Paulson, Brown University
  Non-Presenting Co-Author