Running head: ANNOTATED BIBILIOGRAPHY 1

For-Profit Education Vs. Not-For Profit Education

Name:

Institution:
FOR-PROFIT EDUCATION VS. NOT-FOR PROFIT EDUCATION 2

Theory
Kirabo, J. C. (2013). Do College-Preparaory Programs Improve Long-Term Outcomes? .
Economic Inquiry, 72–99.
The article investigates whether college preparation programs have long-term outcomes.
Analysis of the long-run effects of college preparatory program implemented in inner city
schools is used. The program provides training to the teachers. In addition, eleventh grade and
twelfth grade students and teachers are paid for passing the advanced placement exams. The
results of the study indicated that students who underwent through the program and passed the
advanced placement exam were more likely to continue their education beyond their first year
and earn higher wages. Even though the results are based on non-experimental variation, the
results can be used across a variety of specifications. The study can be applied in both for-profit
and non-profit institutions to estimate the long-term outcomes of their programs.
Susan, D. &. (2012). Student Aid Simplification: Looking Back and Looking Ahead. National
Tax Journal, 211-234.
14 million individuals seek federal aid for higher education completion each year. The
applicants are required to fill a detailed questionnaire that has 116 questions, a free application
for federal student aid (FAFSA). The FAFSA is as long as the IRS form 1040 and considerably
longer than forms 1040A and 1040EZ. The aid offered to college students is intended to increase
college enrolment and completion rates by reducing he price and liquidity constraints. Both
empirical evidence and the economic theory and common sense suggest that the complexity in
accessing that federal aid undermine its ability to make any notable gains. The complexity of the
federal aid system has drawn attention of the presidential candidates, advocacy groups, media,
the council of economic advisors and the national economic council. In this article, a five-year
retrospective of the changes in the federal aid application process and possible future reforms are
provided. The article provides evidence of some of the issues that cause the high default rates of
the federal student aid.
Penn, H. (2011). Gambling on the market: The role of for-profit provision in early childhood
education and care. Journal of Early Childhood Research , 150-161.
The paper investigates the unprecedented expansion of the childcare and education for-
profit market in the United Kingdom. The paper indicates the for-profit market is problematic in
nature and has problems because of its reliance on the for-profit model for delivering
government policies. The paper explores economic rationales for and the limitations of the
market approach to care services and early education. Further, the paper considers indirect and
direct evidence about the functioning of the for-profit market. The paper is excellent in providing
insights into the for-profit model.
Philip, O. &. (2013). Making College Worth It: A Review of Research on the Returns to Higher
Education. New York: The naional bureau of economic research.
FOR-PROFIT EDUCATION VS. NOT-FOR PROFIT EDUCATION 3

The paper reviews research on the returns to higher education. According to the authors,
recent trends of soaring student debt levels and under-placed graduates have raised questions
whether college education is a worth investment. The paper reviews the literature on returns to
higher education to determine who benefits from college education. From the literature survey,
the results indicate that college investment appears to payoff for both marginal and average
students. The literature analysis also revealed that the earnings premium associated with higher
education has risen considerably. The source provides excellent facts that can provide a general
trend for both for-profit and non-profit institutions.
Joseph, G. A. (2012). Heterogeneity in Human Capital Investments: High School Curriculum,
College Major, and Careers. Annual Review of Economics, 185-223.
The paper investigates heterogeneity in human capital investment. Inspired by the huge
differences in the labor market outcomes, the authors survey literature on the demand for and
return to high school and higher education institutions. The paper combines various elements
from several papers to offer a dynamic model of occupation and education choices that stress the
role of uncertainty about preferences, education outcomes, labor market returns, ability and
specificity of human capital. Further, the challenge of estimating the casual impact of the area of
study on wages in the context of sequential choice model with learning is discussed. Finally, the
paper provides an empirical literature review on the choice of curriculum, and the impact of high
school courses and higher institutions major on the labor markets outcome. The paper can be
used to support the argument that the wage differences and federal loans defaults can be based on
the courses offered across institutions.

Seminar articles
GAO. (2010). For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and
Engaged in Deceptive and Questionable Marketing Practices. New York: Government
Accountability Office.
An investigation by the Government Accountability Office aimed to unearth the
marketing practices of the for-profit institutions. The investigation included 15 for-profit
institutions and then outcome indicated that four institutions encouraged fraudulent practices. All
the 15 institutions surveyed made questionable and deceptive statements to the undercover
applicants. Four GAO undercover applicants were encouraged by institution’s personnel to fake
their financial aid forms so that they can receive the federal aid. The institutions also used
deceptive strategies such as forcing the applicants to sign an enrollment contract before speaking
to a financial advisor. The report reveals the fraudulent strategies used by for-profit institutions
to recruit students.

Issues and debates

FOR-PROFIT EDUCATION VS. NOT-FOR PROFIT EDUCATION 4

Osamudia, R. J. (2011). Predatory Ed: The Conflict between Public Good and For-Profit Higher
Education. Journal of College and University Law, 47.
The paper presents a case where the University of Phoenix, a for-profit institution, tries to
recruit individuals from a homeless shelter. The university makes persistent calls to one of the
individuals in the settlement, persuading him to join the university. However, the recruiters do
not spell out the consequences of joining the institution including high default rates, low
unemployment rates and high federal loans. The paper aims to provide evidence of the abuse and
fraud of the recruiting exercise by the for-profit institutions. Further, the institutions target
disadvantaged individuals such as veterans, working class and minority groups. The author
proposes regulation of the for-profit institutions. The paper also provides the for-profit business
model and the major market targets. The paper enables clear understanding of the operations of
the for-profit institutions relative to non-profit institutions.
John, F. &. (2012). Measuring the Impacts of Teachers I: Evaluating Bias in Teacher Value-
Added Estimates. American Economic Review.
The paper investigates whether the influence of the tutors in the students’ test scores
(value added) a good measure of their quality. The issue has sparked a debate largely because of
a disagreement about whether high value-added teachers enhance the long-term outcomes of the
students and whether the value added provides an unbiased projection of the impact of the
teacher on the student’s performance. The paper addresses the two issues by analyzing school
data between grades 3 and 8 for 2.5 school going children associated with tax records on adult
outcomes and parent characteristics. The result does not find any evidence of bias in the value
added estimates using previously unobserved parent features and a quasi-experimental research
design based on teaching staff changes. Students under high value-added teachers are likely to
attend higher education institutions and attend highly ranked institutions, earn higher salaries,
save more for retirements and live in high neighborhoods. Further, such students are less likely
to have children as teenagers. The paper concludes that good teachers provide a substantial
economic value, and that test scores can be used to identify good teachers. The paper can be used
to compare the teaching staff of both for-profit and non-profit institutions to determine whether
there is equality in both sectors.
Key findings
David, J. D. (2012). The For-Profit Postsecondary School Sector: Nimble Critters or Agile
Predators? Journal of Economic Perspectives, American Economic Association, 139-64.
In the US higher education sector, for-profit institutions have grown rapidly over the last
decade. The article indicates that the enrolment in for-profit institutions has increased from 0.2 to
9.1 percent in degree-granting institutions between 1970 and 2009. The article describes the
students, programs and schools in the for-profit post-secondary sector, the growth of the sector
and its relation with the federal governments. The study utilizes the 2004 to 2009 Beginning
Postsecondary Students longitudinal survey. The article assesses a recent cohort of first time
undergraduates who enrolled at for-profit institutions relative to comparable students who
attended public or community colleges or private non-profit schools. The study revealed that for-
profit institutions mainly educate disadvantaged, minority and older students. The institutions
also have a high retention rate for short certificate programs and associate degrees. But the study
FOR-PROFIT EDUCATION VS. NOT-FOR PROFIT EDUCATION 5

also revealed that for-profit graduates have high unemployment rates and lower salaries and
wages six years after graduation as compared with public and non-profit institutions. The for-
profit graduates also have high default rates and greater student debt burdens.
Stephanie, R. C. (2012). The Labor Market Returns to a For-Profit College Education. New
York: The national bureau of Economic Research.
The article evaluates the returns of for-profit institutions. According to the author,
literature estimating education returns has ignored the for-profit institutions. The paper estimates
the earnings gained by for-profit graduates using the 1997 National Longitudinal Survey of
Youth. The authors use an individual fixed effects estimation criterion that allows them to
control for time-invariant unobservable features of students. The outcome of the study indicates
that students who enroll in degree programs in for-profit colleges earn approximately 10 percent
relative to high school graduates who have no college degree. Since the associate degree
program takes approximately three years, this represents a 4 percent return per each academic
year spent in for-profit institutions. This figure is slightly lower than estimated returns from other
educational sector. The article is very vital in comparing the gains of for-profit institutions versus
non-profit institutions.
Cellini, S. R. (2012). Does Federal Student Aid Raise Tuition? New Evidence on For-Profit
Colleges. American Economic Journal: Economic Policy.
The article investigates whether federal loans increase the fees paid in higher institutions
of learning. The study utilizes administrative data collected from five states to estimate the size
of the for-profit postsecondary sector. The study also includes institutions that lack the Title IV
eligibility as outlined in the higher education act. The outcome of the study indicated that the
figure of for-profit colleges is double the official count and the colleges enroll approximately one
third of the total students joining higher education. Most of the institutions that are not title IV
eligible offer the same non-degree and certificate courses as those that are eligible. Further, the
study indicated that title IV eligible institutions charge 78 percent higher in tuition fees as
compared to institutions whose students are not eligible for the financial aid. The dollar value of
the premium is equal to the loan subsidy and grant aid received by students in title IV eligible
institutions, supporting the Bennett hypothesis that eligible for-profit institutions take a large part
of the federal student loan subsidy.
Kevin, L. &. (2012). Evaluating Student Outcomes at For-Profit Colleges. The national
economic Bureau working paper.
The article evaluates student outcomes at for-profit institutions. The study utilizes the
postsecondary student survey to examine the effect of obtaining certificates or degrees from for-
profit, non-profit and public institutions. The outcome of the study indicates that students who
enroll for certificate courses at all institutions do not make significant gains. However, for
associate degrees, there is a statistical significance from enrolling in non-profit and public
institutions. The outcomes are effective in addressing selection of graduates into the labor market
and positive earnings from unemployment using quintiles regression and imputation methods
along with the maximum likelihood sample selection model.
FOR-PROFIT EDUCATION VS. NOT-FOR PROFIT EDUCATION 6

Hai, F. K. (2012). The Returns to Education in China: Evidence from the 1986 Compulsory
Education Law. The national bureau of economic research working paper.
The article analyses the return of education in China as it transforms from the socialist
economy to a market-oriented or capitalist economy. The authors indicate that the return to
education is likely to rise to meet middle income individual relative established market
economies. The study utilizes the compulsory law of 1986. The study utilizes differences among
provinces in the period of the implementation of the law. The law increased educational
attainment in the country by 0.8 years of schooling. The study then utilized the instrumental
variable to control for endogeneity of education and estimate the return of an additional
schooling year between 1997 and 2006. The outcomes of the study reveals that the returns were
around 20 percent per year, which is fairly consistent with returns of most industrialized
economies. The study also indicated returns vary among sub-populations. The article presents the
overall return of education. The returns can be used in the comparison of the non-profit and for-
profit institutions.
Lang, K. &. (2013). The wage effects of not-for-profit and for-profit certifications: Better data,
somewhat different results. Labour Economics, Elsevier, 230-243.
The article analyses the wage effects of the non-profit and for-profit certifications. Both
the transcript Data and the Beginning Postsecondary Student Survey are utilized in the study.
The results of the study show that there is no statistical significant differential return to associate
degrees or certificates between non-profit and for-profit institutions. The study estimates indicate
a slightly lower return at for-profit institutions and slightly higher at non-profit institutions. The
authors indicate that the return differences are contributed by the nature of the associate degree;
non-profit institutions offer BA hence students are less likely to have an associate degree alone.
Further, the study indicated that there are variations in the returns to degrees and certificates
depending with the majors. The article presents a different perspective of understanding the wage
difference among the for-profit and non-profit institutions.
Pedro, C. J. (2011). Estimating Marginal Returns to Education. American Economic Review,
2754-81.
This paper aims to estimate the marginal returns to colleges for students induced to enroll
in particular colleges by different marginal policy changes. The paper shows how individuals can
utilize the local instrumental variables and the economic theory to estimate the effect of marginal
policy changes. Empirical analysis performed by the authors indicate that individuals with values
of unobservable that make them more likely to attend higher education institutions have higher
returns. The paper also indicates that marginal policy changes such as inducing students into
colleges produce low returns. This case can be used to analyze the for-profit institutions and their
methods of attracting students.

Eleanor, W. D. (2013). The Determinants of Mismatch Between Students and Colleges. New
York: The National Bureau of Economic Research.
The paper evaluates the determinants of mismatch between colleges and students. The
national longitudinal survey of the youth (1997) study is used to examine the mismatch between
FOR-PROFIT EDUCATION VS. NOT-FOR PROFIT EDUCATION 7

the college quality and student ability. The mismatch has an effect for the student aid policy and
state higher education systems. The data shows a substantial amount of both overmatch (high
ability individuals at low quality institutions) and undermatch (low ability students at high
quality colleges). The mismatch is mainly driven by student application and enrolment decisions
rather than college admission decisions. Information, public college options and financial
constraints facing the students affect the probability of mismatch. Informed students enroll at
higher quality colleges even when it amounts to mismatch.
Benjamin, L. C. (2013). Looking Beyond Enrollment: The Causal Effect of Need-Based Grants
on College Access, Persistence, and Graduation. New York: The National Bureau of
Economic Research.
The paper evaluates college success among students from different backgrounds where
the gap has persisted for decades in the US. The US government has implemented various
strategies to bridge the gap by need-based grants, but little evidence has linked such grants on
long-term outcomes such as degree completion and college persistence. The paper examines the
Florida Student Access Grant exploiting the cut-off utilized in the determination of eligibility
and regression discontinuity strategy. The outcomes indicate that grant eligibility affect the
attendance, particularly in public institutions. The paper also extends the literature by analyzing
the effect of college aid on college success and revealed that the eligibility of aid increased
cumulative number of college level credits and early persistence. The results can be used to
predict the gap between students in the for-profit institutions and non-profit institutions because
they come from differing backgrounds.
Design
Jeffrey, B. C. (2012). Risk and Returns to Education. The national bureau of statistics
The article assesses risks and returns of education in a lifecycle framework that includes
earnings volatility (unemployment), risk preferences and social insurance system and progressive
income tax. The article reveals that the framework minimizes the measured gains from education
relative to simple present value calculations. For instance, for a preferred range of parameters,
individuals were willing to pay about $400, 000 to obtain a college degree to benefit
approximately 36 percent increase in annual certainty equivalent consumption. Further, the study
explores how the preference parameters vary with the measured value of education across time
and by gender. Contrary to the findings in education wage literature that focuses on present
values, the model uses in this study indicates that gains from obtaining college education were
flat in the 80s and significantly decreased between 1991 and 2007. On the other hand, high
school education gains have increased over time. Finally, the study indicates that college
education helps to reduce the gender gap in earnings, which is contrary to the conclusion from
wage premia calculations. The article provides a good base for compare the returns from for-
profit and non-profit institutions.
Dennis, E. R. (2013). The U.S. Market for Higher Education: A General Equilibrium Analysis of
State and Private Colleges and Public Funding Policies. The National Bureau of
Economic Research.
FOR-PROFIT EDUCATION VS. NOT-FOR PROFIT EDUCATION 8

The paper analyzes the formulation of an equilibrium model of the undergraduate higher
education market that includes the coexistence of private and public colleges, the admission and
tuition policies and the degree of quality differentiation. The model matches well the average
characteristics of the United States Higher Education including the distribution of the federal aid,
college attendance in private and public schools and tuition levels. The model is then used to
measure analyze the consequences of state and federal aid policies. The results indicate that
increasing the availability of the federal aid by a third would lead to 6 percent increase in the
initial college population. On the other hand, reducing the federal aid could reduce the number of
poor students in the higher institutions. The model can be utilized to create new federal student
aid policies, which is a predictor of student outcomes after graduation. (Dennis, 2013)
Tomas, R. E. (2013). Loans for Higher Education: Does the Dream Come True? New York: The
National Bureau of Economic Research.
The paper analyzes the effect of student loans for higher education on dropout decisions,
earnings and enrollment. The paper presents an investigation of the massive state guaranteed
loan (SGL) program that was implemented in Chile in 2006. The empirical analysis used in the
paper is based on the estimation a sequential decision model with unobserved heterogeneity. The
model is supplemented by labor market results. The model is projected using longitudinal data
from the administrative records. The findings show that the SGL program reduces the program
of dropping out and increases the enrolment probability. This paper shows that state loans are
essential for supporting students’ education to boost enrolment rates.