Event Title

Baumol and Bowen Effects at Private Liberal Arts Colleges

Location

Jereld R. Nicholson Library

Date

5-17-2013 3:00 PM

End Date

5-17-2013 4:30 PM

Subject Area

Economics (applied)

Description

I test for Granger-causality between college tuition and college costs. The underlying theory used to support my analysis flows from the research of Baumol (1966) and Bowen (1980). Baumol argues that rising costs are the cause for rising tuition. Bowen argues that colleges raise as much revenue though tuition increases as possible and then spend it all on unlimited wants, resulting in ever-increasing costs. My results indicate simultaneous Granger-causality; increasing costs drive up college tuition and increasing tuition drives up college costs. These results provide evidence in support of both Baumol’s and Bowen’s theories.

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May 17th, 3:00 PM May 17th, 4:30 PM

Baumol and Bowen Effects at Private Liberal Arts Colleges

Jereld R. Nicholson Library

I test for Granger-causality between college tuition and college costs. The underlying theory used to support my analysis flows from the research of Baumol (1966) and Bowen (1980). Baumol argues that rising costs are the cause for rising tuition. Bowen argues that colleges raise as much revenue though tuition increases as possible and then spend it all on unlimited wants, resulting in ever-increasing costs. My results indicate simultaneous Granger-causality; increasing costs drive up college tuition and increasing tuition drives up college costs. These results provide evidence in support of both Baumol’s and Bowen’s theories.