Department or Program
Primary Wellesley Thesis Advisor
Phillip B. Levine
Kristin F. Butcher
In response to increasing income inequality, many private educational institutions have adapted new approaches to financial aid, tuition, and campus investment. Implications of this changing strategy include the rise of an ‘educational arms race’—in which institutions compete to enroll the best (and, at times, wealthiest) students by funding non-academic services (e.g. luxury dorms)—and the risk of relying on such policies to establish socioeconomic diversity. My analysis examines the consequences and implications of rising income inequality on higher education finances and supply-side decisions. In particular, I assess the changes instituted by private, non-parochial high schools, which have policies that closely resemble those of their post-secondary counterparts, when faced with varying levels of local inequality. Using data from the National Association of Independent Schools, and standard methods for addressing pooled, cross-sectional, time series data, I find that income inequality does not have significant effects on financial aid policies or tuition. However, rising inequality does appear to significantly increase the value of endowments (and assumed endowment spending) in these schools.