Student enrollment and faculty renewal: The response of a tenure-based university system to demographic and budgetary shocks

A problem common to many state-funded universities or university systems is how to maintain an inflow of young (and creative) new faculty when student enrollment declines or government grants are reduced, and existing faculty are aging but subject to tenure protection. A generic model is developed in which the problem is posed as one of constrained dynamic optimization. The dimensions of the problem are explored by calibrating the model and carrying out simulations to see how the university would respond to particular demographic and budgetary shocks under alternative assumptions about model structure and government funding arrangements.