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Is the U.S. Private Education Sector Infected by Baumol’s Cost Disease? Evidence from the 50 States

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  • Bates, Laurie
  • Santerre, Rexford

Abstract

High and rising costs characterize the private education industry in the United States. This paper tests if Baumol’s cost disease of the service sector can explain some of the growth of private education spending. An empirical strategy developed by Hartwig (2008) and Colombier (2010) and a panel data set of all U.S. states over the period from 1980 to 2009 are used in the empirical analysis. The empirical results indicate that Baumol’s cost disease does infect the private education industry in the United States. The results are reasonably robust with respect to state- and time-fixed effects, two-stage least squares estimation, individual state time trends, and a variety of potentially important covariates.

Suggested Citation

  • Bates, Laurie & Santerre, Rexford, 2013. "Is the U.S. Private Education Sector Infected by Baumol’s Cost Disease? Evidence from the 50 States," MPRA Paper 52300, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:52300
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    References listed on IDEAS

    as
    1. Hartwig, Jochen, 2008. "What drives health care expenditure?--Baumol's model of 'unbalanced growth' revisited," Journal of Health Economics, Elsevier, vol. 27(3), pages 603-623, May.
    2. Jochen Hartwig, 2011. "Can Baumol's model of unbalanced growth contribute to explaining the secular rise in health care expenditure? An alternative test," Applied Economics, Taylor & Francis Journals, vol. 43(2), pages 173-184.
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    More about this item

    Keywords

    Private education spending; Baumol's cost disease; aggregate productivity;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General

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