Administrative costs in higher education: how fast are they really growing?

Abstract

It is widely believed that administrative expenditures in US higher education are growing too rapidly, particularly in relation to expenditures that are directly related to instruction, and that this so‐called ‘administrative bloat’ is a major factor in the rising cost of higher education. We argue that this perception of rapid growth is exaggerated, and that it results from focusing on simple expenditure aggregates that obscure important variation across institutions. A more careful analysis using panel‐data methods supports a more benign conclusion that administrative expenditures, and their ratio to instructional expenditures, are stationary over time. This conclusion is supported by panel unit‐root tests. This suggests that some of the concern about the role of administrative expenditures in rising higher‐education costs may be misdirected.