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How the Changing Market Structure of U.S. Higher Education Explains College Tuition

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Author Info
Caroline M. Hoxby

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Abstract

This paper presents theoretical and empirical evidence demonstrating the ways in which" the changing market structure of American higher education from 1940 to the present affected" college prices and college quality. Over this period, the market for baccalaureate education" became significantly more competitive, as it was transformed from a collection of local autarkies" to a nationally integrated market. I demonstrate that the results of increased competition were" what industrial organization models (with product differentiation and students being both" consumers of and inputs into higher education) would predict: higher average college quality and" tuitions, greater between-college variation in tuition, greater between-college variation in student" quality, less within-college variation in student quality, higher average subsidies to students greater between-college variation in subsidies. Changing market structure can explain real" tuition increases of approximately 50 percent for selective private colleges. Panel data from" 1940 to 1991 on 1121 baccalaureate-granting colleges are employed, including data on students'" home residences.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6323.

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Date of creation: Dec 1997
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Handle: RePEc:nbr:nberwo:6323

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  1. John Bound & Brad Hershbein & Bridget Terry Long, 2009. "Playing the Admissions Game: Student Reactions to Increasing College Competition," NBER Working Papers 15272, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Garey Ramey & Valerie A. Ramey, 2009. "The Rug Rat Race," NBER Working Papers 15284, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Jeffrey R. Kling, 2000. "Interpreting Instrumental Variables Estimates of the Returns to Schooling," NBER Working Papers 7989, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Gunther Maier, 2006. "Product Differentiation or Spatial Monopoly? The Market Areas of Austrian Universities in Business Education," SRE-Disc sre-disc-2006_03, Department of City and Regional Development, Vienna University of Economics and Business Administration. [Downloadable!]
  5. Tali Regev, 2007. "Imperfect information, self-selection and the market for higher education," Working Paper Series 2007-18, Federal Reserve Bank of San Francisco. [Downloadable!]
  6. Joan Rosselló, 2007. "Does a public university system avoid the stratification of public universities and the segregation of students?," DEA Working Papers 26, Universitat de les Illes Balears, Departament d'Economía Aplicada. [Downloadable!]
  7. Michael J. Rizzo & Ronald G. Ehrenberg, 2003. "Resident and Nonresident Tuition and Enrollment at Flagship State Universities," NBER Working Papers 9516, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Arnaud Chevalier & Peter Dolton & Ros Levacic, 2004. "School Quality and Effectiveness," Working Papers 200410, School Of Economics, University College Dublin. [Downloadable!]
  9. Holger Sieg & Dennis Epple & Richard Romano, 2003. "Peer effects, financial aid and selection of students into colleges and universities: an empirical analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 501-525. [Downloadable!]
    Other versions:
  10. Claudia Goldin & Lawrence F. Katz, 1998. "The Shaping of Higher Education: The Formative Years in the United States, 1890 to 1940," NBER Working Papers 6537, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Dan A. Black & Jeffrey Smith, 2003. "How Robust is the Evidence on the Effects of College Quality? Evidence From Matching," University of Western Ontario, CIBC Human Capital and Productivity Project Working Papers 20033, University of Western Ontario, CIBC Human Capital and Productivity Project. [Downloadable!]
    Other versions:
  12. Jeffrey A. Groen & Michelle J. White, 2003. "In-State versus Out-of State Students: The Divergence of Interest between Public Universities and State Governments," NBER Working Papers 9603, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. G. Thomas Sav, 2004. "Higher education costs and scale and scope economies," Applied Economics, Taylor and Francis Journals, vol. 36(6), pages 607-614, April. [Downloadable!] (restricted)
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