How the Financial Crisis and Great Recession Affected Higher Education

How the Financial Crisis and Great Recession Affected Higher Education analyzes how universities manage their endowments and how they responded to the financial crisis and ensuing Great Recession. The authors were selected deliberately to include experts on finance (especially those who had experience with endowments) and experts on the economics of higher education. From the outset, the book was intended to foster a conversation with university leaders, and the chapters benefitted greatly from the meaningful discussions with them that occurred at the associated conference. Key questions included (i) whether universities’ methods of endowment management were optimal, rational, and/or likely to create budget crises during financial market downturns; (ii) whether donors, state governments, or the federal government exacerbate or ameliorate the effect of business cycles on universities; (iii) whether universities respond to reduced income by cutting costs (for instance, by reducing their number of faculty) or by raising tuition. Like a few previous NBER volumes-but unlike the vast majority of other work by economists-the studies analyze the economics of higher education from the institutions’ point of view, taking them seriously as organizations with incentives and constraints of their own.