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Subsidies, Hierarchy and Peers: The Awkward Economics of Higher Education

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Author Info
Gordon C. Winston
Abstract

Higher education is an industry where markets don't clear, prices on average cover less than a third of production costs, the resulting student subsidies are given in strikingly different amounts by different schools, creating a sharply hierarchical market. And an input important to production can be bought only from the firm's own customers. This paper describes the resulting structure of costs, prices, subsidies, and hierarchy using an augmented theory of nonprofits and 1995 national data to show their magnitudes and suggest their often significant implications. Public intuition and economic models of firms, industries, and welfare often yield distorted understanding and dubious public policies.

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Publisher Info
Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 13 (1999)
Issue (Month): 1 (Winter)
Pages: 13-36
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Handle: RePEc:aea:jecper:v:13:y:1999:i:1:p:13-36

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-16, October. [Downloadable!] (restricted)
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  2. Basu, Kaushik, 1989. "A Theory of Association: Social Status, Prices and Markets," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 653-71, October. [Downloadable!] (restricted)
  3. Dennis W. Carlton & Gustavo E. Bamberger & Roy J. Epstein, 1995. "Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid?," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 131-147, Spring. [Downloadable!] (restricted)
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  4. Berhman, J-R & Kletzer, L & Constantine, J & McPherson, M & Schapiro, M-O, 1996. "The Impact of College Quality on Wages : Are There Differences Among Demographic Groups?," Williams Project on the Economics of Higher Education 38, Department of Economics, Williams College.
  5. Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 44-49, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bruce Sacerdote & David Marmaros, 2005. "How Do Friendships Form?," NBER Working Papers 11530, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. 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)
  3. Egon Franck & Christian Opitz, 2004. "The singularity of the German doctorate as a signal for talent: Causes, consequences and future developments," Working Papers 0028, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  4. Laura Romero, 2005. "On the role of borrowing constraints in public and private universities' choices," Economics Bulletin, Economics Bulletin, vol. 9(6), pages 1-8. [Downloadable!]
  5. John Bound & Sarah Turner, 2006. "Cohort Crowding: How Resources Affect Collegiate Attainment," NBER Working Papers 12424, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Egon Franck & Torsten Pudack & Christian Opitz, 2001. "Zur Funktion von Topmanagement-Beratungen als Karrieresprungsbrett für High Potentials," Working Papers 0003, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  7. George J. Borjas, 2004. "Do Foreign Students Crowd Out Native Students from Graduate Programs?," NBER Working Papers 10349, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Dahlia K. Remler & Elda Pema, 2009. "Why do Institutions of Higher Education Reward Research While Selling Education?," NBER Working Papers 14974, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Laura Romero & Elena del Rey, 2004. "Competition Between Public And Private Universities: Quality, Prices And Exams," Economics Working Papers we046423, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  10. Susan Dynarski, 2002. "The Behavioral and Distributional Implications of Aid for College," American Economic Review, American Economic Association, vol. 92(2), pages 279-285, May. [Downloadable!]
  11. Egon Franck & Christian Opitz, 2003. "Different higher education patterns of topmanagers in the U.S., France, and Germany. A signaling approach," Working Papers 0022, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
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