College Tuition and Income Inequality
Zhifeng Cai, Jonathan Heathcote
American Economic Review · 2022 · Volume 112 · Issue 1
Abstract
This paper evaluates the role of rising income inequality in explaining observed growth in college tuition. We develop a competitive model of the college market, in which college quality depends on instructional expenditure and the average ability of admitted students. An innovative feature of our model is that it allows for a continuous distribution of college quality. We find that observed increases in US income inequality can explain more than half of the observed rise in average net tuition since 1990 and that rising income inequality has also depressed college attendance.
Keywords
Personal Income, Wealth, and Their Distributions, Educational Finance, Financial Aid, Higher Education, Research Institutions, Education and Inequality
Enable JavaScript for citation tools and additional paper interactions.