Will The University Endowment Tax Slow Scientific Progress? Evidence from Elite Economics PhD Programs

The 2025 university endowment tax hike and other sources of financial pressure may lead the schools that train the most prolific economics researchers to reduce graduate enrollment. Will this affect long-run research output? We use a novel sample of MIT Economics PhD program applicants to estimate the research value-added of eight elite schools. Our estimates mitigate selection bias by controlling for MIT admissions committee rankings—a remarkably strong predictor of long-run research success—and for applicant aspirations as revealed by their application portfolios. While rank controls substantially reduce estimated gaps between elite and non-elite graduates, large differences in value-added remain. Graduates of high-tax and other top-eight schools produce 60-75% more impact-adjusted publications than do comparable graduates from non-top-eight US schools. The elite-school advantage is especially pronounced for top five journal publications. Differences in research success within the elite tier, however, are relatively modest. The out-performance of elite-school PhDs does not appear to be explained by editorial connections or peer effects in elite programs.