Academic rent-seeking and direct appropriations

by on May 26, 2005 at 3:21 pm in Education | Permalink

According to The Chronicle of Higher Education, there were 1,964 earmarks to 716 academic institutions costing a total of $2 billion in the 2003 fiscal year, or just over 10 percent of the federal money spent on academic research. From 1996 to 2003, the amount spent on academic earmarks grew at an astounding rate of 31 percent a year, after adjusting for inflation…

As academic earmarks have grown, so have universities’ lobbying expenditures. Spending on lobbying jumped to $62 million in 2003 from $23 million in 1998, according to The Chronicle of Higher Education.

A study by John M. de Figueiredo of the University of California, Los Angeles and Brian S. Silverman of the University of Toronto, which will soon be published in The Journal of Law and Economics, finds that universities receive a high return on their lobbying dollars. The researchers related the amount each university received in earmarks to its lobbying expenditures from 1997 to 1999, and other factors.

Professors de Figueiredo and Silverman found that a $1 increase in lobbying expenditures is associated with a $1.56 increase in earmarks for universities in districts that do not have a senator or congressman on the crucial Appropriations Committees, and more than a $4.50 gain in earmarks for universities with a representative on one of the Appropriations Committees.

Even among universities that do not lobby, those that have a congressman or senator on the Appropriations Committees tend to be awarded more earmarked funds.

A university’s fortunes also tend to rise or fall when senators from its state join or exit the Appropriations Committee. For example, the year after Senator Lauch Faircloth of North Carolina, a member of the committee, was defeated by John Edwards, who did not become a member, earmarks to universities in North Carolina fell by half.

But alas, all this money does not seem to pay off in terms of quality:

…a university’s academic standing, as measured by the National Academy of Science’s ranking of departments, is not related to the amount of earmarked funds it receives.

A. Abigail Payne, an economist at McMaster University in Canada, has studied how earmarks affect the quantity and quality of academic research, inferring quality from the number of times research studies are cited by subsequent studies. She concludes that "earmarked funding may increase the quantity of publications but decrease the quality of the publications and the performance of earmarked funding is lower than that from using peer-reviewed funding."

Indications are that academic earmarks crowd out spending on competitive peer-reviewed grants, at least in the short run.

Alan Krueger offers more.  Here is a very early version of the first cited paper.

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