John Kennan

university of Wisconsin-Madison and NBER

March 2015

Abstract
In the U.S. there are large differences across States in the extent to which college education is
subsidized, and there are also large differences across States in the proportion of college graduates
in the labor force. State subsidies are apparently motivated in part by the perceived benefits of
having a more educated workforce. The paper extends the migration model of Kennan and Walker
(2011) to analyze how geographical variation in college education subsidies affects the migration
decisions of college graduates. The model is estimated using NLSY data, and used to quantify
the sensitivity of migration and college enrollment decisions to differences in expected net lifetime
income, focusing on how cross-State differences in public college financing affect the educational
composition of the labor force. The main finding is that these differences have substantial effects
on college enrollment, with no evidence that these effects are dissipated through migration