Is the U.S. Private Education Sector Infected by Baumol’s Cost Disease? Evidence from the 50 States

Laurie Bates and Rexford Santerre ()

MPRA Paper from University Library of Munich, Germany

Abstract: High and rising costs characterize the private education industry in the United States. This paper tests if Baumol’s cost disease of the service sector can explain some of the growth of private education spending. An empirical strategy developed by Hartwig (2008) and Colombier (2010) and a panel data set of all U.S. states over the period from 1980 to 2009 are used in the empirical analysis. The empirical results indicate that Baumol’s cost disease does infect the private education industry in the United States. The results are reasonably robust with respect to state- and time-fixed effects, two-stage least squares estimation, individual state time trends, and a variety of potentially important covariates.

Keywords: Private education spending; Baumol's cost disease; aggregate productivity (search for similar items in EconPapers)
JEL-codes: I20 (search for similar items in EconPapers)
Date: 2013-12-16
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (1)

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