No. 19-2 - State Disinvestment in Higher Education - The Impact on Public Research Universities’ Patent Applications

Oct 15, 2026

Uploaded by Jacob

State appropriations are the largest revenue source for U.S. public universities, yet they have fallen substantially over recent decades. Empirical evidence has been limited on how appropriation cuts affect research output. This paper examines how state appropriations shape patent production in public universities. Findings indicate that lower state funding reduces the number of approved patent applications, largely by decreasing research expenditures, especially wages and salaries for research staff.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages36

Reading Time1 h 31 min

AccessFree to download

Introduction

Motivation and funding trends

Mechanisms behind declining support

Research objectives and approach

No. 19-2 State Disinvestment in Higher Education: The Impact on Public Research Universities’Patent Applications Bo Zhao Abstract: While state appropriations are the largest revenue source of the U.S. public university systems, they have declined significantly over the past several decades. Surprisingly, there is little empirical work on the effect of state appropriation cuts on the research productivity of public universities. Helping fill that gap, this paper is the first to examine the role that state appropriations play in public universities’ patent production. The results suggest that state appropriation cuts have a negative impact on the number of approved patent applications from public research universities. Lower state appropriations are shown to lead to a reduction in research expenditures, especially wages and salaries paid to research staff. JEL Classifications: H75, H77, I23 Keywords: state appropriations, state funding cuts, higher education, public universities, patent applications Bo Zhao is a senior economist at the New England Public Policy Center in the Federal Reserve Bank of Boston Research Department. His e-mail address [is](is bo.zhao@bos.frb.org)[ ](is bo.zhao@bos.frb.org)[bo.zhao@bos.frb.org](is bo.zhao@bos.frb.org). The author would like to thank Margaret E. Blume-Kohout, Katharine Bradbury, Osborne Jackson, Leslie E. Papke, Robert Triest, and participants at the National Tax Association Annual Conference, the Association for Public Policy Analysis and Management Annual Fall Research Conference, and the New England Public Policy Center Brown Bag Seminar for helpful comments. Calvin Kuo provided research assistance. This paper presents preliminary analysis and results intended to stimulate discussion and critical comment. The views expressed herein are those of the author and do not indicate concurrence by the Federal Reserve Bank of Boston, the principals of the Board of Governors, or the Federal Reserve System. This paper, which may be revised, is available on the website of the Federal Reserve Bank of Boston at [http://www.bostonfed.org/economic/wp/index.htm](http://www.bostonfed.org/economic/wp/index.htm). This version: July 2018 I. Introduction In addition to educating students, public research universities pursue a core mission of producing high-quality research (Castellanos 2015) .1 Their research activities are important and relevant for public policies in part because they have positive spillovers that increase social benefits. New academic research often provides a foundation for innovations in pharmaceuticals, information technologies, and other high-tech industries (Mansfield 1995). The research activity can especially benefit the local economy and industries, because the externality is often concentrated in a small geographic area near the school (Jaffe 1989; Bania, Eberts, and Fogarty 1993; Mansfield and Lee 1996; Anselin, Varga, and Acs 1997; Adams 2002; Zheng and Slaper 2016) . Therefore, many people argue that the research capacity of public universities affects the economic growth and competitiveness of their host communities and states (Castellanos 2015; Conroy and Shannon 2015) . States play a critical role in financing public universities in the United States; however, that role has been diminishing over the past several decades (Kane, Orszag, and Gunter 2003; Kane, Orszag, and Apostolov 2005; Tandberg 2010; Goodman and Henriques 2015) . Figure 1 shows that state appropriations, as the largest revenue source in aggregate, accounted for about 34 percent of U.S. public universities’ total revenue in 1993. The share dropped to less than 18 percent in 2014. Furthermore, Long (2016) shows that cuts in state appropriations for higher education have affected all types of public institutions, including public research universities. Many scholars and the popular press call this phenomenon “state disinvestment in higher education”(Delisle 2017). It is particula

FAQs

Why are state appropriations important to public universities' research?

They are the largest revenue source for U.S. public university systems and directly fund research-related activities that can generate positive spillovers for society.

What is the main question this paper investigates?

How changes in state appropriations affect public universities’ patent production and research productivity, including variation by university type and over time.

What does the paper find about the effect of appropriation cuts?

State appropriation cuts negatively affect the number of approved patent applications, with lower funding leading to reduced research expenditures, particularly wages and salaries for research staff.

Oct 15, 2026

Uploaded by Jacob