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ERIC Number: EJ791868
Record Type: Journal
Publication Date: 2008
Pages: 28
Abstractor: ERIC
Reference Count: 34
ISSN: ISSN-0022-1546
Explaining Increases in Higher Education Costs
Archibald, Robert B.; Feldman, David H.
Journal of Higher Education, v79 n3 p268-295 May-Jun 2008
The real cost of higher education per full-time equivalent student has grown substantially over the last 75 years, and the rapid rise since the early 1980s is a cause of considerable public concern. Opinion surveys consistently find that how much one has to pay for a college education is a serious national issue. In his July 1996 congressional testimony, David Breneman laid out the difficulty very neatly. He said that there are two competing theories explaining the rise of costs in higher education. The first relies on the insights of William Baumol and William Bowen about the cost difficulties faced by personal services industries (Baumol, 1967; Baumol & Bowen, 1966). The ideas behind the "cost disease" explanation in higher education have a distinguished heritage in economics. The competing explanation is Howard Bowen's "revenue theory of costs" (1980). In Howard Bowen"s view, the source of cost increases in higher education is the rising revenue stream made available to colleges and universities. This article aims to explain the two competing approaches in some detail. To summarize the author's view, cost disease rests on a firmer behavioral foundation than Bowen's revenue theory. Despite that advantage, the choice between them ultimately is empirical. As Breneman noted in his testimony, "it is hard to test these two theories because for most of the post WWII era, higher education has experienced remarkable revenue growth" (1996, p. 60). The time series evidence on college costs is indeed compatible with both the cost disease and revenue theory explanations. The authors propose instead a cross-section test using disaggregated price data from a broad set of industries. The article follows in three additional sections. Section two provides a detailed discussion of the competing explanations for rapid cost increases in higher education. Section three contains the authors' test. Section four discusses the policy consequences of their findings. (Contains 4 figures, 1table and 21 notes.)
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Publication Type: Journal Articles; Reports - Evaluative
Education Level: Higher Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A