Differentiation among US Colleges
GORDON C. WINSTON
Department of Economics, Williams College, Williamstown, MA 01267, USA.
Abstract. Colleges and universities in the US diﬀer markedly in their access to economic
resources. National data are used here to describe the resulting hierarchy that’s reﬂected in
schools’ spending on their students, the prices those students pay, and the subsidies they get in
consequence. Both historical data and projections based on recent institutional saving suggest
that economic disparities among institutions and their students are increasing. In a ﬁnal
section, the paper asks what to make of this: what we can say about ‘‘the right degree’’ of
institutional disparity – whether we have too much, too little, or about the right amount of
Keywords: Colleges and universities, higher education, optimal disparities, saving and wealth,
stratiﬁcation and hierarchy, student subsidies
It is clear why we care about a person’s access to higher education: going to
college will improve quality of life, participation as a thoughtful citizen, and –
increasingly – lifetime earnings. So we care whether people go to college. But
why do we care about where they go? About college choice? The answer to
that is probably just as ﬁrmly felt – it is something like, ‘‘Because colleges and
universities are very diﬀerent from each other and those diﬀerences matter’’ –
but that answer has much more of anecdote and faith and US News and
World Report behind it and much less of fact. Eﬀorts to show that students’
future incomes are inﬂuenced by college choice have not been conclusive.
The purpose of this paper includes the following three goals:
to describe what has been learned in the last decade about the economic
‘‘heterogeneity’’ of higher education – about the basic economic diﬀer-
ences among schools that support stratiﬁcation and the hierarchy of
colleges and universities,
to look at recent data to say something about the past and likely future of
those diﬀerences – the dynamics of diﬀerentiation – and, ﬁnally,
See Dale and Kruger, Ehrenberg, James, et al. inter alia.
Review of Industrial Organization 24: 331–354, 2004.
Ó 2004 Kluwer Academic Publishers. Printed in the Netherlands.