Discussion paper

DP13101 College Tuition and Income Inequality

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 nd 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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Citation

Heathcote, J (2018), ‘DP13101 College Tuition and Income Inequality‘, CEPR Discussion Paper No. 13101. CEPR Press, Paris & London. https://cepr.org/publications/dp13101