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The Competitive Effects of Online Education

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  • David J. Deming
  • Michael Lovenheim
  • Richard W. Patterson

Abstract

We study the impact of online degree programs on the market for U.S. higher education. Online degree programs increase the competitiveness of local education markets by providing additional options in areas that previously only had a small number of brick-and-mortar schools. We show that local postsecondary institutions in less competitive markets experienced relative enrollment declines following a regulatory change in 2006 that increased the market entry and enrollment of online institutions. Impacts on enrollment were concentrated among private non-selective institutions, which are likely to be the closest competitors to online degree programs. We also find increases in per-student instructional spending among public institutions. Our results suggest that by increasing competitive pressure on local schools, online education can be an important driver of innovation and productivity in U.S. higher education.

Suggested Citation

  • David J. Deming & Michael Lovenheim & Richard W. Patterson, 2016. "The Competitive Effects of Online Education," NBER Working Papers 22749, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22749
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    References listed on IDEAS

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    1. Cook, Jason B., 2018. "The effect of charter competition on unionized district revenues and resource allocation," Journal of Public Economics, Elsevier, vol. 158(C), pages 48-62.
    2. David J. Deming & Claudia Goldin & Lawrence F. Katz, 2012. "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 139-164, Winter.
    3. Lisa J. Dettling & Sarena Goodman & Jonathan Smith, 2018. "Every Little Bit Counts: The Impact of High-Speed Internet on the Transition to College," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 260-273, May.
    4. William G. Bowen & Matthew M. Chingos & Kelly A. Lack & Thomas I. Nygren, 2014. "Interactive Learning Online at Public Universities: Evidence from a Six‐Campus Randomized Trial," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 33(1), pages 94-111, January.
    5. Charles T. Clotfelter, 1999. "The Familiar but Curious Economics of Higher Education: Introduction to a Symposium," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 3-12, Winter.
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    Cited by:

    1. Michael S. Kofoed & Lucas Gebhart & Dallas Gilmore & Ryan Moschitto, 2024. "Zooming to Class? Experimental Evidence on College Students' Online Learning during COVID-19," American Economic Review: Insights, American Economic Association, vol. 6(3), pages 324-340, September.
    2. Marina Bassi & Lelys Dinarte-Diaz & Maria Marta Ferreyra & Sergio Urzua, 2023. "What Makes a Program Good? Evidence from Short-Cycle Higher Education Programs in Five Developing Countries," CESifo Working Paper Series 10255, CESifo.
    3. Lauren Russell, 2021. "Price Effects of Nonprofit College and University Mergers," The Review of Economics and Statistics, MIT Press, vol. 103(1), pages 88-101, March.
    4. Armona, Luis & Chakrabarti, Rajashri & Lovenheim, Michael F., 2022. "Student debt and default: The role of for-profit colleges," Journal of Financial Economics, Elsevier, vol. 144(1), pages 67-92.
    5. Luis Armona & Rajashri Chakrabarti & Michael F. Lovenheim, 2018. "How Does For-profit College Attendance Affect Student Loans, Defaults and Labor Market Outcomes?," NBER Working Papers 25042, National Bureau of Economic Research, Inc.
    6. Hardt, David & Nagler, Markus & Rincke, Johannes, 2022. "Can peer mentoring improve online teaching effectiveness? An RCT during the COVID-19 pandemic," Labour Economics, Elsevier, vol. 78(C).
    7. Brian Knight & Nathan Schiff, 2022. "Reducing Frictions in College Admissions: Evidence from the Common Application," American Economic Journal: Economic Policy, American Economic Association, vol. 14(1), pages 179-206, February.
    8. Dinarte Diaz,Lelys Ileana & Ferreyra,Maria Marta & Urzua,Sergio & Bassi,Marina, 2021. "What Makes a Program Good ? Evidence from Short-Cycle Higher Education Programs in LatinAmerica and the Caribbean," Policy Research Working Paper Series 9722, The World Bank.
    9. Dinarte-Diaz, Lelys & Ferreyra, Maria Marta & Urzua, Sergio & Bassi, Marina, 2023. "What makes a program good? Evidence from short-cycle higher education programs in five developing countries," World Development, Elsevier, vol. 169(C).

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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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