College Expenditures: Improving the Quality of the Undergraduate Student Body
Date
2011
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Haverford College. Department of Economics
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Thesis
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eng
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Haverford users only
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Abstract
This paper examines the trend of rising expenditures and tuition at private, liberal arts colleges, a phenomenon that has become known as the “arms race of spending”. This increase in spending has largely been driven by elite colleges’ desire to attract the best and brightest students in the face of rising competition. This thesis aims to explore this market inefficiency and determine if private, liberal arts colleges have actually succeeded in matriculating a more intelligent or diverse student body by increasing expenditures per student. It presents a theoretical model predicting why institutions have chosen to operate at this socially suboptimal outcome, and then utilizes an OLS and fixed effects regression model to test this hypothesis. This analysis suggests that increasing expenditures has an essentially negligible effect on attracting a more intelligent or diverse student body at both private, liberal arts colleges ranked among the top twenty-five in the nation and institutions ranked twenty-six to one hundred and fifty.