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For-Profit Higher Education: Godzilla or Chicken Little?

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  • Winston, G.C.

Abstract

Student subsidies are large, ubiquitous, and very unevenly distributed in US higher education - covering, on average, two-thirds of a student's educational costs and ranging from $2,600 in the bottom decile of schools ranked by subsidy size to $24,000 in the top. So data on the distribution of those subsidies among colleges and universities identifies the schools that are most vulnerable to the emergence of an accredited, degree-granting for-profit sector: profits (price minus cost) are simply negative subsidies (cost minus price). Roughly a third of private two-year colleges, and doctoral and comprehensive universities are badly protected by their meager student subsidies that put them in the bottom ten percent. In the top decile, with large entry barriers erected by large student subsidies, schools can worry less about survival but no less about for-profit "cherry picking" within their curricula and programs as firms move to take over those courses that give students the smallest subsidies.

Suggested Citation

  • Winston, G.C., 1998. "For-Profit Higher Education: Godzilla or Chicken Little?," Williams Project on the Economics of Higher Education DP-49, Department of Economics, Williams College.
    • Handle: RePEc:wil:wilehe:49
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    References listed on IDEAS

    as
    1. Estelle James, 1978. "Product Mix and Cost Disaggregation: A Reinterpretation of the Economics of Higher Education," Journal of Human Resources, University of Wisconsin Press, vol. 13(2), pages 157-186.
    2. Gordon C. Winston & Ethan G. Lewis, 1997. "Physical Capital and Capital Service Costs in U.S. Colleges and Universities: 1993," Eastern Economic Journal, Eastern Economic Association, vol. 23(2), pages 165-189, Spring.
    3. Gordon C. Winston, 1999. "Subsidies, Hierarchy and Peers: The Awkward Economics of Higher Education," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 13-36, Winter.
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    More about this item

    Keywords

    EDUCATION ; SUBSIDIES ; UNITED STATES;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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