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Title: College Tuition and Income Inequality

Author(s): Zhifeng Cai and Jonathan Heathcote

Publication Date: August 2018

Keyword(s): Club goods, College tuition and Income inequality

Programme Area(s): Labour Economics and Macroeconomics and Growth

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 the entire observed rise in average net tuition since 1990 and that rising income inequality has also depressed college attendance.

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Bibliographic Reference

Cai, Z and Heathcote, J. 2018. 'College Tuition and Income Inequality'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13101