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Pricing in the Not-for-Profit Sector: Can Wealth Growth at American Colleges Explain Chronic Tuition Increases?


  • Pablo A. Peña


In the period 1980-2005 tuition at American private colleges more than doubled in real terms, and these institutions grew much wealthier. I develop a model that establishes conditions under which increases in colleges' wealth cause higher tuition. The empirical analysis supports the hypothesis that growth in colleges' wealth is one of the reasons behind rapid tuition growth, although it does not provide accurate estimates of the elasticity of tuition to college wealth. The result is consistent with previous studies that find that part of the increase in colleges' expenditures over the 1980s and 1990s can be attributed to quality improvement.

Suggested Citation

  • Pablo A. Peña, 2010. "Pricing in the Not-for-Profit Sector: Can Wealth Growth at American Colleges Explain Chronic Tuition Increases?," Journal of Human Capital, University of Chicago Press, vol. 4(3), pages 242-273.
  • Handle: RePEc:ucp:jhucap:doi:10.1086/657563

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    References listed on IDEAS

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    3. Stacy Berg Dale & Alan B. Krueger, 2002. "Estimating the Payoff to Attending a More Selective College: An Application of Selection on Observables and Unobservables," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1491-1527.
    4. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    5. Griffith, Amanda & Rask, Kevin, 2007. "The influence of the US News and World Report collegiate rankings on the matriculation decision of high-ability students: 1995-2004," Economics of Education Review, Elsevier, vol. 26(2), pages 244-255, April.
    6. 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.
    7. Dominic J. Brewer & Eric R. Eide & Ronald G. Ehrenberg, 1999. "Does It Pay to Attend an Elite Private College? Cross-Cohort Evidence on the Effects of College Type on Earnings," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 104-123.
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    Cited by:

    1. Lynne Pepall & Dan Richard, 2014. "Competition, Selectivity and Innovation in the Higher Educational Market," Discussion Papers Series, Department of Economics, Tufts University 0782, Department of Economics, Tufts University.

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