Skill-Biased Technical Change and the Cost of Higher Education

48 Pages Posted: 26 Oct 2012

See all articles by John Bailey Jones

John Bailey Jones

Federal Reserve Bank of Richmond; SUNY at Albany - School of Business

Fang Yang

Louisiana State University, Baton Rouge

Date Written: October 24, 2012

Abstract

We document the growth in higher education costs and tuition over the past 50 years. To explain these trends, we develop a general equilibrium model with skill- and sector-biased technical change. We assume that higher education suffers from Baumol's (1967) service sector disease, in that the quantity of labor and capital needed to educate a student is constant over time. Finding the model's parameters through a combination of calibration and estimation, we show that it can explain the rise in college costs between 1961 and 2009, along with the increase in college attainment and the increase in the relative earnings of college graduates. We finish by using the model to perform a number of numerical experiments.

Keywords: higher education, skill-biased technical change

JEL Classification: I23, J24, D58

Suggested Citation

Jones, John B. and Yang, Fang, Skill-Biased Technical Change and the Cost of Higher Education (October 24, 2012). Available at SSRN: https://ssrn.com/abstract=2167037 or http://dx.doi.org/10.2139/ssrn.2167037

John B. Jones

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804 697-8206 (Phone)

HOME PAGE: http://www.albany.edu/~jbjones

SUNY at Albany - School of Business ( email )

Bus Admin 110
1400 Washington Avenue
Albany, NY 12222
518-442-4926 (Phone)

Fang Yang (Contact Author)

Louisiana State University, Baton Rouge ( email )

Baton Rouge, LA 70803
United States

HOME PAGE: http://faculty.bus.lsu.edu/fyang/

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