This book advances the frontier of knowledge about productivity in U.S. higher education. This sector directly accounts for 3% of the economy and indirectly affects it in nearly every aspect of society because higher education produces the advanced skills crucial to a highly developed nation. Higher education is perhaps our most important “upstream industry.” Thus, understanding its productivity is essential. It is also urgent because support for it has never been more in doubt. Policymakers, families, philanthropists, and the press are skeptical about whether the benefits of higher education ... More

This book advances the frontier of knowledge about productivity in U.S. higher education. This sector directly accounts for 3% of the economy and indirectly affects it in nearly every aspect of society because higher education produces the advanced skills crucial to a highly developed nation. Higher education is perhaps our most important “upstream industry.” Thus, understanding its productivity is essential. It is also urgent because support for it has never been more in doubt. Policymakers, families, philanthropists, and the press are skeptical about whether the benefits of higher education outweigh the costs. The chapters herein combine rich and novel administrative data, economic reasoning, modern econometric methods, and deep institutional understanding to produce a groundbreaking and comprehensive treatment of the topic. We demonstrate how to assess productivity in higher education and present productivity estimates across institutions, fields of study, and instructors. We explore how productivity varies across outcomes (earnings versus innovative, say) and how institutions’ productivity responds to market forces. Our starting point is the recognition that productivity is fundamental to all resource allocation decisions. Understanding productivity is important when judging whether the market for higher education generates positive incentives, assessing government policies that subsidize students, allocating a budget efficiently among an institution’s activities, and deciding whether and where to attend college. Thus, at every level of decision-making (social, institutional, individual), the productivity of higher education investments is crucial. While also true of other sectors of the economy, productivity measurement has received little attention in higher education