NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

When Investor Incentives and Consumer Interests Diverge: Private Equity in Higher Education

Charlie Eaton, Sabrina Howell, Constantine Yannelis

NBER Working Paper No. 24976
Issued in August 2018
NBER Program(s):Corporate Finance, Economics of Education, Labor Studies, Productivity, Innovation, and Entrepreneurship

This paper uses private equity buyouts to study a transition from lower- to higher-powered profit-maximizing incentives in higher education, a sector heavily dependent on government subsidy. Private equity owners have especially high-powered incentives to maximize profits. In a subsidized industry, this could intensify focus on capturing government aid at the expense of consumer outcomes. Employing novel data on 88 private equity deals and 994 schools with private equity ownership, we find that private equity buyouts lead to higher enrollment and profits, but also to lower education inputs, higher tuition, higher per-student debt, lower graduation rates, lower student loan repayment rates, and lower earnings among graduates. Neither changes to the student body composition nor a selection mechanism fully explain our results. In a series of tests exploiting regulatory events and thresholds, we find that private equity-owned schools are better able to capture government aid.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24976

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us