James, Estelle. 1978. "Product Mix and Cost Disaggregation: A Reinterpretation of the Economics of Higher Education." Journal of Human Resources 13(2):157-186.

This paper attempts to separate undergraduate, graduate, and research costs at the university. Since the proportion of resources allocated to each of these activities varies systematically across time and institutions, this disaggregation alters our cross-sectional and intertemporal picture of productivity, net benefits, and subsidies in higher education. Real undergraduate costs are shown to be much lower than previously assumed and the social rate of return higher; educational "productivity" has been rising through time, contrary to popular belief. Undergraduate education is now a profitable "production" activity at universities, used to subsidize their "consumption" of loss-making graduate education. Community college teaching is more costly and heavily subsidized than university teaching of lower-division students.

The author is Professor Economics and Provost of Social and Behavioral Sciences, State University of New York at Stony Brook. I wish to thank my colleague, Egon Neuberger, and an anonymous referee for their comments on earlier versions of this paper. This paper is part of a project on Resource Allocation in Higher Education supported by the National Science Foundation. Assistance was also received during a visit with the Higher Education Research Unit, London School of Economics.

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US ISSN 0022-166X

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