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American Higher Education and Income Inequality

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  • Catharine B. Hill

    (Department of Economics Vassar College Poughkeepsie, NY)

Abstract

This paper demonstrates that increasing income inequality can contribute to the trends we see in American higher education, particularly in the selective, private nonprofit and public sectors. Given these institutions’ selective admissions and commitment to socioeconomic diversity, the paper demonstrates how increasing income inequality leads to higher tuition, costs, and financial aid. A numerical example is presented that estimates how much lower tuition, spending (costs), and financial aid would have been if household incomes in the United States had grown by the same aggregate amount between 1971 and 2009, but with no increase in income inequality. The policy implications include the government addressing rising income inequality directly or changing the incentives facing higher education and will be of interest to those concerned with the rising cost of higher education and issues of access and affordability.

Suggested Citation

  • Catharine B. Hill, 2016. "American Higher Education and Income Inequality," Education Finance and Policy, MIT Press, vol. 11(3), pages 325-339, Summer.
    • Handle: RePEc:tpr:edfpol:v:11:y:2016:i:3:p:325-339
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    References listed on IDEAS

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    1. Archibald, Robert B. & Feldman, David H., 2014. "Why Does College Cost So Much?," OUP Catalogue, Oxford University Press, number 9780190214104.
    2. Joseph G. Altonji & Prashant Bharadwaj & Fabian Lange, 2012. "Changes in the Characteristics of American Youth: Implications for Adult Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 30(4), pages 783-828.
    3. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-586, June.
    4. Gordon C. Winston, 2003. "Toward a Theory of Tuition: Prices, Peer Wages, and Competition in Higher Education," Williams Project on the Economics of Higher Education DP-65, Department of Economics, Williams College.
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