‘‘Sectarian Competition and the Market Provision of Human Capital,’’ a talk by Heyu Xiong, assistant professor of economics, Weatherhead School of Management, Case Western Reserve University.
In the latter half of the 19th century, America experienced a significant expansion in its collegiate infrastructure. By 1890, more institutions of higher learning existed in the United States than all of Europe.
In this paper, we study the role of denominational competition in the market provision of higher education. Specifically, we document nearly all colleges established in this time period had denominational roots or origins. The empirical analysis reveals a robust positive relationship between an area’s religious fragmentation and the number of colleges established locally.
We argue that denominational affiliation facilitated enthusiasm to build colleges through gains to differentiation from standard Hotelling channels. We formulate a model of school choice and find evidence that denominational affiliation softened the extent of tuition competition and mediated an “excess” entry of colleges.
We conclude by showing that the higher equilibrium quantity of schools, associated with increased entry, had a persistent effect on institutional quality; thus, religious diversity precipitated educational investment.
Sponsored by the Department of Economics Danforth-Lewis Speakers Series.