College curriculum, diverging selectivity, and enrollment expansion

We analyze the heterogeneous impact of expansion of higher education on student outcomes in the context of competition among colleges, which differentiate themselves horizontally by setting curricular standards. Our analysis is based on a novel model of human capital production where a student’s outcome of studies at a college depends on the match between the student’s aptitude and the standard of the college’s curriculum. We find that when public or economic pressures compel less selective colleges to lower their curricular standards, low-ability students benefit at the expense of medium-ability students. This reduces competitive pressure faced by more selective colleges, which therefore adopt more demanding curricula to better serve their most able students. This model of curricular product differentiation in higher education offers an explanation for the diverging selectivity trends of American colleges.