Distributive effect of state subsidy to undergraduate education: the case of Illinois

An assessment is made of the distributive effects of state subsidies to undergraduate education in public universities and community colleges in Illinois during 1989. The main finding is that the existing system of public subsidy to undergraduate education favors lower-income and middle-income groups. Public subsidies lead to redistribution of income from higher-income to lower-income and middle-income families, with the most significant transfer being from the highest-income group to families with income of less than $40 000 per year. A comparison of the patterns for universities and community colleges indicates that middle-income groups are the major beneficiaries of community colleges; the net transfer from the highest-income group is larger, and the net gain of the poorest group is smaller, in community colleges than in universities. [JEL I22, H7]  1999 Elsevier Science Ltd. All rights reserved.