Scholars disagree about the effect out-of-state university students have on potential in-state students. Despite paying a premium to attend state universities, researchers argue that out-of-state students may come at a cost to in-state students by negatively affecting academic quality or by crowding out in-state students. To study this relationship, we examine the effect of a 2016 policy at a highly ranked state flagship university that removed the limit on how many out-of-state students it could enroll. We find the policy caused an increase in out-of-state enrollment by around 29 percent and increased tuition revenue collected by the university by 47 percent. We argue that this revenue was used to fund increases in financial aid disbursed at the university, particularly to students from low-income households, indicating that out-of-state students cross-subsidize lower income students. We also fail to find evidence that this increase in out-of-state students had any effect on several measures of academic quality.
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