The Economics of American Higher Education

The Economics of American Higher Education

The Economics of American Higher Education Edited by William E. Becker Professor of Economics Indiana University and Darrell R. Lewis Professor of Educational Policy University of Minnesota Springer Science+Business Media, LLC

Ubrary of Congreu Cataloglng-ln-Publlcallon Data The Economica 01 American higher education/edhed by William E. Becker anei Darrell R. Lewis. p. CI1\. Includes bibliographical relerences and index. ISBN 978-94-010-5310-5 ISBN 978-94-011-2950-3 (ebook) DOI 10.1007/978-94-011-2950-3 1. Education, Higher-Economic aspecis-united Stales. 1. Becker, William E. II. Lewis, Darreli R. LC67.62.E257 1982 338.4'337873-dc20 Copyright 1992 Springer Science+Business Media New York Originally published by Kluwer Academic Publishers in 1992 Softcover reprint of the hardcover 1 si edition 1992 AII rights res9lv9d. No pari of this publication may ba reproduced, stored in a retrieval system ar transmitted in any forrn ar by any means, mechanical, phoio-copying, recording, or otherwise, without the prior wrilten pennission oilhe publisher, Springer Science+Business Media, LLC Printed on acid-free paper.

Contents Contributors About the Editors Preface vii ix xi 1 Preview of the Economics of American Higher Education William E. Becker and Darrell R. Lewis Part I The Missions of American Higher Education 15 2 The Teaching Role of Contemporary American Higher Education: Popular Imagery and Organizational Reality James C. Hearn 17 3 The Research and Service Missions of the University G. Edward Schuh and Vernon W. Ruttan 69 Part II Higher Education as Personal Investment and Advancement 89 4 Why Go to College? The Value of an Investment in Higher Education William E. Becker 91 5 Wages of College Graduates Kevin M. Murphy and Finis Welch 121 v

VI CONTENTS 6 Private Returns to Specific College Majors Mark C. Berger 141 7 Private Nonmonetary Returns to Investment in Higher Education Elchanan Cohn and Terry G. Geske 173 Part III Higher Education and Regional Growth 197 8 The Role of Universities in Regional Economic Development Tim R. Smith and Mark Drabenstott 199 9 Higher Education and Regional Development Larry L. Leslie and Sheila A. Slaughter 223 10 Measuring the Regional Economic Effects of Federal Research Grants Rebecca Dorsett Goodman and William C. Weiler 253 11 The Ambiguous Link: Private Industry and University Research Roger L. Geiger 265 Part IV Higher Education as Social Investment for Equity 299 12 Equity Issues in Higher Education Outcomes Melissa S. Anderson and James C. Hearn 301 Index 335

Contributors Melissa S. Anderson, Postdoctoral Fellow in Higher Education, University of Minnesota William E. Becker, Professor of Economics, Indiana University Mark C. Berger, Professor of Economics, University of Kentucky Elchanan Cohn, Professor of Economics, College of Business Administration, University of South Carolina Mark Drabenstott, Assistant Vice President and Economist, Federal Reserve Bank of Kansas City Roger L. Geiger, Professor of Education, The Pennsylvania State University Terry G. Geske, Professor and Chairperson, College of Education, Administrative and Foundational Services, Louisiana State University Rebecca Dorsett Goodman, Senior Statistical Analyst, Bureau of Community Corrections, Hennepin County, Minnesota James C. Hearn, Professor of Higher Education, Institute of Higher Education, University of Georgia Larry L. Leslie, Director of the Center for the Study of Higher Education, and Professor of Higher Education, College of Education, University of Arizona Darrell R. Lewis, Professor of Educational Policy, and Professor of Education, University of Minnesota Kevin M. Murphy, Professor of Business Economics and Industrial Relations, Graduate School of Business, University of Chicago Vernon W. Ruttan, Regents Professor of Agricultural and Applied Economics, University of Minnesota G. Edward Schuh, Professor and Dean, Hubert H. Humphrey Institute of Public Affairs, University of Minnesota vii

viii CONTRIBUTORS Sheila A. Slaughter, Professor of Higher Education, University of Arizona Tim R. Smith, Senior Economist, Federal Reserve Bank of Kansas City William C. Weiler, Assistant Provost, Stanford University Finis Welch, Professor of Economics, University of California at Los Angeles and Unicon Research Corporation

About the Editors William E. Becker is a professor of economics at Indiana University. He is editor of the Journal of Economic Education and serves on the editorial board of the Economics of Education Review. His research appears in the American Economic Review, American Journal of Agricultural Economics, Econometric Theory, Journal of Finance, Journal of Human Resources, Journal of Risk and Insurance, Monthly Labor Review, Review of Economics and Statistics, and other journals. He is also the co-author of Business and Economics Statistics and co-editor of Academic Rewards in Higher Education and Econometric Modeling in Economic Education Research. Darrell R. Lewis is professor of educational policy and higher education at the University of Minnesota. His research interests have been in the economics of education with a current focus on issues relating to educational efficiency and postschool outcomes. He is the author or co-author of numerous articles, monographs, and books. He has co-edited Academic Rewards in Higher Education and Faculty Vitality and Institutional Productivity and co-authored And on the Seventh Day: Faculty Consulting and Other Supplemental Income Activities and Assessing Outcomes, Costs and Benefits of Special Education Programs. ix

Preface Postsecondary educational institutions in the United States are facing increasing financial stress and waning public support. Unless these trends can be changed, higher education can be expected to stagnate. What, if anything, can be done? As a starting point, advocates of higher education need to more fully recognize the issues associated with the economic mission of higher education and how this mission gets translated into individual student gains, regional growth, and social equity. This requires an understanding of the relationship between the outcomes of higher education and measures of economic productivity and well-being. This volume addresses topics related to the role of postsecondary education in microeconomic development within the United States. Attention is given to the importance of colleges and universities 'in the enhancement of individual students and in the advancement of the communities and states within which they work. Although several of the chapters in this volume are aimed at research/teaching universities, much of what is presented throughout can be generalized to all of postsecondary education. Little attention, however, is given to the role of higher education in the macroeconomic development of the United States; this topic is covered in our related book, American Higher Education and National Growth. The chapters in this book summarize the research literature and synthesize what economists and other social scientists have learned about the contribution of higher education to economic development within the American society. Many of the chapters were originally commissioned by the editors for a seminar on these topics at the University of Minnesota during the spring of 1989. The seminar was financed by grants from the Hubert H. Humphrey Institute and the College of Education at the Xl

xii PREFACE University of Minnesota. To the deans and faculty of both units, as well as David Berg and Stephen Hoenack (Management Planning and Information Services), we are indebted for institutional support and collegial interaction. Additional support for manuscript preparation was provided by the Joint Council on Economic Education, for which we are most grateful. In The Economics of American Higher Education we have assembled a group of recognized scholars from economics and the other social sciences who have individually made significant contributions to the literature in higher education. The authors draw heavily from their own research in providing current evidence while focusing on their assigned chapter topics. To all of our 16 contributing authors we are thankful. Without their work this book would not have been possible. Manuscript editing was done by Suzanne Becker as part of her duties as assistant editor of the Journal of Economic Education. As always her patience, eye for detail, and skill with the English language are acknowledged and appreciated. Together with the reference librarians at Indiana University, whose services are gratefully acknowledged, Sue did all the final reference work. Manuscript preparation was completed in the Department of Economics at Indiana University through the capable word processing skills of Elaine Yarde, to whom we are indebted. William E. Becker Darrell R. Lewis