Working Paper: NBER ID: w18745
Authors: Brian Jacob; Brian McCall; Kevin M. Stange
Abstract: This paper investigates whether demand-side market pressure explains colleges' decisions to provide consumption amenities to their students. We estimate a discrete choice model of college demand using micro data from the high school classes of 1992 and 2004, matched to extensive information on all four-year colleges in the U.S. We find that most students do appear to value college consumption amenities, including spending on student activities, sports, and dormitories. While this taste for amenities is broad-based, the taste for academic quality is confined to high-achieving students. The heterogeneity in student preferences implies that colleges face very different incentives depending on their current student body and the students who the institution hopes to attract. We estimate that the elasticities implied by our demand model can account for 16 percent of the total variation across colleges in the ratio of amenity to academic spending, and including them on top of key observable characteristics (sector, state, size, selectivity) increases the explained variation by twenty percent.
Keywords: Higher Education; Consumption Amenities; Student Preferences; Demand-Side Market Pressure
JEL Codes: I20; I21; I23; J01; J18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| student preferences for consumption amenities (D11) | college spending decisions (I23) |
| higher-achieving students (D29) | willingness to pay for academic quality (D29) |
| college spending decisions (I23) | ratio of amenity to academic spending (I23) |
| demand-side elasticities (D12) | explained variation in ratio of amenity to academic spending (I23) |