College Tuition and Income Inequality

TY - JOUR

T1 - College Tuition and Income Inequality

AU - Cai, Zhifeng

AU - Heathcote, Jonathan

N1 - Publisher Copyright: © 2022 American Economic Association. All rights reserved.

PY - 2022/1/1

Y1 - 2022/1/1

N2 - 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.

AB - 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.

UR - https://www.scopus.com/pages/publications/85123394634

UR - https://www.scopus.com/pages/publications/85123394634#tab=citedBy

U2 - 10.1257/aer.20181027

DO - 10.1257/aer.20181027

M3 - Article

SN - 0002-8282

VL - 112

SP - 81

EP - 121

JO - American Economic Review

JF - American Economic Review

IS - 1

ER -