Is the U.S. Private Education Sector Infected by Baumol’s Cost Disease?

Is the U.S. Private Education Sector Infected by Baumol’s Cost Disease?
Is the U.S. Private Education Sector Infected by Baumol’s Cost Disease?

Article

High and rising costs characterize the private education industry in the United States. This paper tests if Baumol’s cost disease of the service sector can explain some of the growth of private education spending. An empirical strategy developed by Hartwig (2008) and Colombier (2010) and a panel data set of all U.S. states over the period from 1980 to 2009 are used in the empirical analysis. The results indicate that Baumol’s cost disease does infect the private education industry in the United States. This falls in line with ISM's recommendations concerning tuition and financial aid adjustments.

Image of a teacher and students in class
Image of a teacher and students in class