ACQUIRING HUMAN CAPITAL: ANALYSIS OF DATA OF 139 HIGHER EDUCATION INSTITUTIONS IN THE US FROM 2012 TO 2022

Christopher Warburton

Regional and Sectoral Economic Studies, 2023, vol. 23, issue 2, 5-34

Abstract: Some private institutions of higher learning in the US have come under severe financial distress and succumbed to extinction after the COVID epidemic (2019-2020). Using data on 139 institutions of higher education in the US, macroeconomic data from 2012 to 2022, classifications of the institutions into three categories—public undergraduate, non-parochial undergraduate, and parochial Christian undergraduate—, eleven (shock) variables or indicators, and factor analysis, this paper finds that private undergraduate institutions, including Christian colleges, are failing at a faster rate relative to their counterparts. Ironically, the internal rate of return (IRR) to investment in parochial colleges is higher than the negative IRR that correlates with their non-parochial counterpart. The paper finds that the stability of public academic institutions is strongly associated with revenues from in- and out-of-state tuition, which could be attenuated by the diminutive effects of inflation. Public sector education is more stable because of in- and out-of state tuition—coinciding with relatively robust rates of enrollment—though the general rate of enrollment in the US is negatively correlated with the stability of education in the private sector. The paper concludes that despite the critical role of human capital for economic growth and development, and the ability of the parochial institutions to promise higher rates of return to investment in human capital, financially weaker institutions have become critically endangered after the COVID epidemic.

Keywords: Development; Human capital; Internal rate of return; Investment; Factor Analysis. (search for similar items in EconPapers)
JEL-codes: I (search for similar items in EconPapers)
Date: 2023
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