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COVID-19 and Financial Sustainability of Academic Institutions

Author

Listed:
  • Oleg V. Pavlov

    (Department of Social Science and Policy Studies, Worcester Polytechnic Institute, Worcester, MA 01609, USA)

  • Evangelos Katsamakas

    (Gabelli School of Business, Fordham University, New York, NY 10023, USA)

Abstract

The COVID-19 pandemic has had a significant impact on higher education. Steering academic institutions through the pandemic is a complex and multifaceted task that can be supported with model-based scenario analysis. This article studies the short-term and long-term effects of the pandemic on the financial health of a college using scenario analysis and stress testing with a system dynamics model of a representative tuition-dependent college. We find that different combinations of the pandemic mitigation protocols have varying effects on the financial sustainability of an academic institution. By simulating six individual components of the COVID-19 shock, we learn that due to the causal complexity, nonlinear responses and delays in the system, the negative shocks can propagate widely through the college, sometimes with considerable delays and disproportionate effects. Scenario analysis shows that some pandemic mitigation choices may destabilize even financially healthy institutions. The article concludes that higher education needs new sustainable business models.

Suggested Citation

  • Oleg V. Pavlov & Evangelos Katsamakas, 2021. "COVID-19 and Financial Sustainability of Academic Institutions," Sustainability, MDPI, vol. 13(7), pages 1-24, April.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:7:p:3903-:d:528126
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    References listed on IDEAS

    as
    1. Wesley J. Wildman & Saikou Y. Diallo & George Hodulik & Andrew Page & Andreas Tolk & Neha Gondal, 2020. "The Artificial University: Decision Support for Universities in the COVID-19 Era," Complexity, Hindawi, vol. 2020, pages 1-10, December.
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    3. Raafat Mahmoud Zaini & Oleg V. Pavlov & Khalid Saeed & Michael J. Radzicki & Allen H. Hoffman & Kristen R. Tichenor, 2017. "Let's Talk Change in a University: A Simple Model for Addressing a Complex Agenda," Systems Research and Behavioral Science, Wiley Blackwell, vol. 34(3), pages 250-266, May.
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    6. Oleg V Pavlov & Evangelos Katsamakas, 2020. "Will colleges survive the storm of declining enrollments? A computational model," PLOS ONE, Public Library of Science, vol. 15(8), pages 1-29, August.
    7. Jahangirian, Mohsen & Eldabi, Tillal & Naseer, Aisha & Stergioulas, Lampros K. & Young, Terry, 2010. "Simulation in manufacturing and business: A review," European Journal of Operational Research, Elsevier, vol. 203(1), pages 1-13, May.
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    Cited by:

    1. Borazon, Elaine Quintana & Chuang, Hsueh-Hua, 2023. "Resilience in educational system: A systematic review and directions for future research," International Journal of Educational Development, Elsevier, vol. 99(C).
    2. Jangwan Ko & Seungsu Paek & Seoyoon Park & Jiwoo Park, 2021. "A News Big Data Analysis of Issues in Higher Education in Korea amid the COVID-19 Pandemic," Sustainability, MDPI, vol. 13(13), pages 1-18, June.
    3. Pavlov, Oleg V. & Katsamakas, Evangelos, 2023. "Tuition too high? Blame competition," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 409-431.

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