Local taxpayers were more likely to support great local universities when the young talent created by these great schools remains local. But the new talent is footloose and can migrate anywhere. In this age of spatial inequality, the footloose young stars are moving to the coasts and this acts as a tax on the Wisconsin, Ohio, and Michigan taxpayers' investments. Gary Becker would argue that workers should pay for their own general skills investments. Low in-state tuition precludes this.
UPDATE: Here is Tim Bartik's 2009 study on this topic.
Abstract
This paper provides new information on what proportion of individuals spend their adult work lives in their childhood metropolitan area or state. I also examine how this proportion varies across different demographic groups, and with the size and growth rate of the metropolitan area. I find that the proportion of individuals who spend most of their adulthood in their childhood metropolitan area is surprisingly high. Furthermore, this proportion does not go down as much as one might think for smaller or slower-growing metropolitan areas, or for college-educated persons. These findings imply that state and local investments in children may pay off for the state or local area that makes these investments. A surprisingly large proportion of the individuals who benefit from these childhood investments will remain in the same state or local area as adults, thereby boosting the local economy.
ANOTHER UPDATE: I was sent this link . This piece argues that public universities generate substantial new R&D . While this is true, I wonder how the state's taxpayers benefit from this. The new startup firms created based on the R&D do not have to locate in the same state where the idea was created. When I taught at UCLA, the university was very proud of the royalties it collected on intellectual property created by the medical school, engineers and scientists but I don't believe that the California taxpayers "saw a dime" of this $. The Provost kept it. Now, maybe there is a crowding out such that Jerry Brown gets a piece of this but then why would the University be so excited to generate new royalties for drugs and other new products if the University can't keep the $?
My wife had a more thoughtful idea. She argued that a Michigan taxpayer values the option that his child could get a good University of Michigan education and then leave the state. So, if midwest tax payers enjoy holding "lottery tickets" to send a kid to the coast then this would explain the ongoing subsidies. Note there are two lotteries here. First, a Michigan taxpayer's kid has to be admitted to the University of Michigan. Second, this kid has to thrive at UM and be offered a Silicon Valley job. If both of these conditions holds, then the taxpayer's bet (i.e having paid her taxes and this $ going to the University) pays off.
ANOTHER UPDATE: I was sent this link . This piece argues that public universities generate substantial new R&D . While this is true, I wonder how the state's taxpayers benefit from this. The new startup firms created based on the R&D do not have to locate in the same state where the idea was created. When I taught at UCLA, the university was very proud of the royalties it collected on intellectual property created by the medical school, engineers and scientists but I don't believe that the California taxpayers "saw a dime" of this $. The Provost kept it. Now, maybe there is a crowding out such that Jerry Brown gets a piece of this but then why would the University be so excited to generate new royalties for drugs and other new products if the University can't keep the $?
My wife had a more thoughtful idea. She argued that a Michigan taxpayer values the option that his child could get a good University of Michigan education and then leave the state. So, if midwest tax payers enjoy holding "lottery tickets" to send a kid to the coast then this would explain the ongoing subsidies. Note there are two lotteries here. First, a Michigan taxpayer's kid has to be admitted to the University of Michigan. Second, this kid has to thrive at UM and be offered a Silicon Valley job. If both of these conditions holds, then the taxpayer's bet (i.e having paid her taxes and this $ going to the University) pays off.