Economic Theory

, Volume 67, Issue 4, pp 1019–1050 | Cite as

College curriculum, diverging selectivity, and enrollment expansion

  • Michael KaganovichEmail author
  • Xuejuan Su
Research Article


We analyze the heterogeneous impact of expansion of higher education on student outcomes in the context of competition among colleges, which differentiate themselves horizontally by setting curricular standards. Our analysis is based on a novel model of human capital production where a student’s outcome of studies at a college depends on the match between the student’s aptitude and the standard of the college’s curriculum. We find that when public or economic pressures compel less selective colleges to lower their curricular standards, low-ability students benefit at the expense of medium-ability students. This reduces competitive pressure faced by more selective colleges, which therefore adopt more demanding curricula to better serve their most able students. This model of curricular product differentiation in higher education offers an explanation for the diverging selectivity trends of American colleges.


Curricular standard College selectivity Enrollment expansion College market competition Higher education 

JEL Classification

I23 I24 J24 D21 


  1. Acemoglu, D., Autor, D.: Skills, tasks and technologies: implications for employment and earnings. In: Ashenfelter, O., Card, D. (eds.) Handbook of Labor Economics, Part B, vol. 4. North-Holland, Amsterdam (2011)Google Scholar
  2. Arcidiacono, P., Lovenheim, M.: Affirmative action and the quality-fit trade-off. J. Econ. Lit. 54, 3–51 (2016)CrossRefGoogle Scholar
  3. Arcidiacono, P., Aucejo, E.M., Hotz, V.J.: University differences in the graduation of minorities in STEM fields: evidence from California. Am. Econ. Rev. 106, 525–562 (2016)CrossRefGoogle Scholar
  4. Bellman, R.: Introduction to Matrix Analysis. McGraw-Hill, New York (1960)Google Scholar
  5. Betts, J.: The impact of educational standards on the level and distribution of earnings. Am. Econ. Rev. 88, 266–275 (1998)Google Scholar
  6. Blankenau, W.: Public schooling, college subsidies and growth. J. Econ. Dyn. Control 29, 487–507 (2005)CrossRefGoogle Scholar
  7. Blankenau, W., Cassou, S., Ingram, B.: Allocating government education expenditures across K${-}$12 and college education. Econ Theory 31, 85–112 (2007). CrossRefGoogle Scholar
  8. Cellini, S.R.: Financial aid and for-profit colleges: Does aid encourage entry? J. Policy Anal. Manag. 29, 526–552 (2010)CrossRefGoogle Scholar
  9. Cellini, S.R.: For-profit higher education: an assessment of costs and benefits. Natl. Tax J. 65, 153–179 (2012)CrossRefGoogle Scholar
  10. Chung, A.S.: Choice of for-profit college. Econ. Educ. Rev. 31, 1084–1101 (2012)CrossRefGoogle Scholar
  11. Costrell, R.: A simple model of educational standards. Am. Econ. Rev. 84, 956–971 (1994)Google Scholar
  12. Costrell, R.: Can centralized educational standards raise welfare? J. Publ. Econ. 65, 271–293 (1997)CrossRefGoogle Scholar
  13. Cunha, F., Heckman, J.: The technology of skill formation. Am. Econ. Rev. 97, 31–47 (2007)CrossRefGoogle Scholar
  14. De Fraja, G., Iossa, E.: Competition among universities and the emergence of the elite institution. Bull. Econ. Res. 54, 275–293 (2002)CrossRefGoogle Scholar
  15. Driskill, R., Horowitz, A.: Investment in hierarchical human capital. Rev. Dev. Econ. 6, 48–58 (2002)CrossRefGoogle Scholar
  16. Duflo, E., Dupas, P., Kremer, M.: Peer effects, teacher incentives, and the impact of tracking: evidence from a randomized evaluation in Kenya. Am. Econ. Rev. 101, 1739–1774 (2011)CrossRefGoogle Scholar
  17. Epple, D., Romano, R.: Competition between private and public schools, vouchers, and peer-group effects. Am. Econ. Rev. 88, 33–62 (1998)Google Scholar
  18. Epple, D., Romano, R., Sieg, H.: Admission, tuition, and financial aid policies in the market for higher education. Econometrica 74, 885–928 (2006)CrossRefGoogle Scholar
  19. Galor, O., Moav, O.: Ability-biased technological transition, wage inequality, and economic growth. Q. J. Econ. 115, 469–497 (2000)CrossRefGoogle Scholar
  20. Gantmacher, F.R.: The Theory of Matrices, vol. 1,2. Chelsea Publishing Co., New York (1959)Google Scholar
  21. Gilpin, G., Kaganovich, M.: The quantity and quality of teachers: dynamics of the trade-off. J. Publ. Econ. 96, 417–429 (2012)CrossRefGoogle Scholar
  22. Gould, E., Moav, O., Weinberg, B.: Precautionary demand for education, inequality, and technological progress. J. Econ. Growth 6, 285–315 (2001)CrossRefGoogle Scholar
  23. Hoxby, C.: The changing selectivity of American colleges. J. Econ. Perspect. 23, 95–118 (2009)CrossRefGoogle Scholar
  24. Hoxby, C.: Endowment management based on a positive model of the university. In: Brown, J., Hoxby, C. (eds.) How the Financial Crisis and Great Recession Affected Higher Education. University of Chicago Press, Chicago (2014)Google Scholar
  25. Laitner, J.: Earnings within education groups and overall productivity growth. J. Polit. Econ. 108, 807–832 (2000)CrossRefGoogle Scholar
  26. Light, A., Strayer, W.: Determinants of college completion: School quality or student ability? J. Hum. Resour. 35, 299–332 (2000)CrossRefGoogle Scholar
  27. Lochner, L., Shin, Y.: Understanding earnings dynamics: identifying and estimating the changing roles of unobserved ability, permanent and transitory shocks. NBER Working Papers 20068 (2014)Google Scholar
  28. MacLeod, B., Urquiola, M.: Reputation and school competition. Am. Econ. Rev. 105, 3471–88 (2015)CrossRefGoogle Scholar
  29. Moulin, H.: Game Theory for the Social Science. NYU Press, New York (1986)Google Scholar
  30. Rothschild, M., White, L.: The analytics of the pricing of higher education and other services in which the customers are inputs. J. Polit. Econ. 103, 573–586 (1995)CrossRefGoogle Scholar
  31. Spence, M.: Job market signaling. Q. J. Econ. 87, 355–374 (1973)CrossRefGoogle Scholar
  32. Su, X.: The allocation of public funds in a hierarchical educational system. J. Econ. Dyn. Control 28, 2485–2510 (2004)CrossRefGoogle Scholar
  33. Su, X.: Endogenous determination of public budget allocation across education stages. J. Dev. Econ. 81, 438–456 (2006)CrossRefGoogle Scholar
  34. Taber, C.: The rising college premium in the eighties: Return to college or return to unobserved ability? Rev. Econ. Stud. 68, 665–691 (2001)CrossRefGoogle Scholar
  35. Winston, G.: Subsidies, hierarchy and peers: the awkward economics of higher education. J. Econ. Perspect. 13, 13–36 (1999)CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsIndiana UniversityBloomingtonUSA
  2. 2.Department of EconomicsUniversity of AlbertaEdmontonCanada

Personalised recommendations