College Tuition and Income Inequality

Zhifeng Cai and Jonathan Heathcote

American Economic Review, 2022, vol. 112, issue 1, 81-121

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.

JEL-codes: D31 I22 I23 I24 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Working Paper: College Tuition and Income Inequality (2018)
Working Paper: College Tuition and Income Inequality (2018)
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DOI: 10.1257/aer.20181027

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