Private vs. Social Returns to Higher Education: Some New Cross-Sectional Evidence

Richard Vedder

Journal of Labor Research, 2004, vol. 25, issue 4, 677-686

Abstract: University presidents and some academic economists assert that expenditures on higher education further human capital formation and thus promote economic growth. Rising earnings differentials between college and high school educated persons seem consistent with this hypothesis. Statistical evidence, however, suggests that increased state governmental spending on universities is negatively associated with economic growth, even though having more college graduates, ceteris paribus, is growth enhancing. Further evidence shows that governmental higher education spending has little impact on college participation. The notions that colleges are primarily credentialing devices and that universities have used incremental funds largely for non-instructional purposes are consistent with the results.

Date: 2004
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