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Student racial and ethnic diversity in higher education is an important and timely topic, as institutions, policy makers, and economists increasingly recognize the value that accrues at many levels of having a skilled and diverse student body and workforce. Students benefit from learning in a diverse environment; firms may benefit from a diverse workforce; and more demographically diverse regions may experience higher rates of economic growth. However, the forces governing institution-level student diversity are poorly understood, as little prior research on the topic exists. This paper uses school enrollment data to parse out the contribution of institutional characteristics, geographical setting, and local demographic characteristics to student body diversity at each level of study. Results indicate that geographical location and local demographic composition play a role in student body diversity, as do the type and orientation of the institution. Institutional characteristics explain a lot of the variation in student body diversity and actual location of schools matters less than the demographic composition of young people around that location. Two broad conclusions emerge with regard to schools seeking to increase their student diversity. First, some may find their efforts hampered by circumstances outside their control (e.g., location). Second, the influence of public/private status and even school size suggests further research on the ways in which these factors influence student diversity so that eventual policy action can be more effective. [ABSTRACT FROM AUTHOR]