[Excerpt] The eight Ivy League institutions – Brown, Columbia, Cornell, Dartmouth, Harvard, Pennsylvania, Princeton and Yale - are among our nations most selective undergraduate institutions. They also are among its wealthiest. They compete against each other for top faculty, graduate and undergraduate students, as well as on intercollegiate athletic fields. However, this competition has never taken place on a level “playing field” because of the vast differences in endowment resources that have always existed across the institutions. The prolonged stock market expansion during the 1990s magnified these differences in ways that many still do not fully comprehend

Ehrenberg, Ronald G

Smith, Christopher L

English

[Excerpt] The eight Ivy League institutions – Brown, Columbia, Cornell, Dartmouth, Harvard, Pennsylvania, Princeton and Yale - are among our nations most selective undergraduate institutions. They also are among its wealthiest. They compete against each other for top faculty, graduate and undergraduate students, as well as on intercollegiate athletic fields. However, this competition has never taken place on a level “playing field” because of the vast differences in endowment resources that have always existed across the institutions. The prolonged stock market expansion during the 1990s magnified these differences in ways that many still do not fully comprehend.cheri_wp16.pdf: 411 downloads, before Oct. 1, 2020

Ehrenberg, Ronald G.

Smith, Christopher L.

eCommons (Cornell Univ.)

What a Difference a Decade Makes: Growing Wealth Inequality Among Ivy League Institutions

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Working Papers ILR Collection 
May 2001 
What a Difference a Decade Makes: Growing Wealth Inequality 
Among Ivy League Institutions 
Ronald G. Ehrenberg 
Cornell University, rge2@cornell.edu 
Christopher L. Smith 
Cornell University 
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What a Difference a Decade Makes: Growing Wealth Inequality Among Ivy League 
Institutions 
Abstract 
[Excerpt] The eight Ivy League institutions – Brown, Columbia, Cornell, Dartmouth, Harvard, Pennsylvania, 
Princeton and Yale - are among our nations most selective undergraduate institutions. They also are 
among its wealthiest. They compete against each other for top faculty, graduate and undergraduate 
students, as well as on intercollegiate athletic fields. However, this competition has never taken place on 
a level “playing field” because of the vast differences in endowment resources that have always existed 
across the institutions. The prolonged stock market expansion during the 1990s magnified these 
differences in ways that many still do not fully comprehend. 
Keywords 
Ivy League, wealth inequality, resource allocation, endowment levels, enrollment levels 
Comments 
Suggested Citation 
Ehrenberg, R. G. and Smith, C. L. (2001) What a difference a decade makes: growing wealth inequality 
among Ivy League institutions (CHERI Working Paper #16). Retrieved [insert date], from Cornell University, 
ILR School site: http://digitalcommons.ilr.cornell.edu/workingpapers/27/ 
Required Publisher Statement 
Published by the Cornell Higher Education Research Institute, Cornell University. 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/workingpapers/27 
Revised Draft
May 3, 2001
Comments Solicited
     WHAT A DIFFERENCE A DECADE MAKES:  GROWING
WEALTH INEQUALITY AMONG IVY LEAGUE INSTITUTIONS
                                                        by
                          Ronald G. Ehrenberg and Christopher L. Smith*
* Ehrenberg is the Irving M. Ives Professor of Industrial and Labor Relations and
Economics at Cornell University and Director of the Cornell Higher Education Research
Institute. Smith is a sophomore in Cornell’s School of Industrial and Labor Relations. We
are grateful to the Andrew W. Mellon Foundation and other donors for their support of
our research. However, all views expressed here are strictly our own.
1The eight Ivy League institutions – Brown, Columbia, Cornell, Dartmouth,
Harvard, Pennsylvania, Princeton and Yale- are among our nations most selective
undergraduate institutions. They also are among its wealthiest. They compete against
each other for top faculty, graduate and undergraduate students, as well as on
intercollegiate athletic fields. However, this competition has never taken place on a level
“playing field” because of the vast differences in endowment resources that have always
existed across the institutions. The prolonged stock market expansion during the 1990s
magnified these differences in ways that many still do not fully comprehend.
On July 1, 1990 the endowments at the eight Ivy institutions varied from about
$441 million at Brown to $4.683 billion at Harvard (table 1). A decade later, the range
was $1.44 billion to $19.2 billion. The rapid growth of stock prices during the 1990s
inflated these institutions’ endowment values and led to large increases in their annual
giving, which further increased their endowments. The Ivy institutions’ endowments
grew by an average of 261% during the decade, which far exceeded the decade’s increase
in consumer prices of 30.9%.  Harvard’s endowment growth of over 300% was the
largest of all the institutions.
Focusing on endowment levels ignores the differences in enrollment levels that
also exist across the institutions. Endowment levels per full-time student are often used to
measure the relative wealth of institutions. Of course, the institutions vary in the shares of
their student bodies that are enrolled in undergraduate, professional and doctoral
programs and the costs of educating different types of students vary. Some of the
institutions have medical colleges, which consume large shares of the institutions’
endowment resources but enroll relatively few students. One of the institutions, Cornell,
2also receives state support to help subsidize the operations of some of its colleges and in
return charges substantially lower tuition to New York State residents that enroll in these
colleges. Nonetheless focusing on the institutions’ endowments per full-time student is
probably the best way to grasp how wide the resource differences are across the
institutions.1      
On July 1, 1990 Princeton led the group with an endowment of almost $390,00
per student. Harvard and Yale were close behind with endowment per student levels of
about $281,000 and $245,000, respectively. The three “poorest Ivies” – Brown, Cornell
and Pennsylvania” had endowments per student that varied between $44,000 and
$62,000. Ten years later, the three richest Ivies endowments average over $1,000,000 per
student, while the bottom three averaged under $200,000.
Put another way, even though the percentage changes in the endowment values at
the richest and the poorest institutions were roughly the same over the decade, the
absolute changes in their endowments per student varied markedly. The richest three
institutions’ endowments grew by an average of over $800,000 per student. In contrast
the poorest three institutions’ endowments grew by an average of less than $140,000 per
student. Where each institution started the decade determined where it wound up!
What did this substantial change in the distribution of the absolute levels of
endowment per student across the Ivy League institutions mean for the distribution of
resources that each institution had available annually to spend on current operations per
full-time student? A private university’s spending comes from many sources but, as a
                                                
1 The uses of some endowments are restricted and do not necessarily contribute to an institution’s resources
that are available for undergraduate student use. For example, if an endowment supports a university press
and the university would not have a press in the absence of the endowment, the university press endowment
should not be thought of as contributing to the resource base for undergraduate students.
3first approximation, the major sources of its funds that are spent educating and providing
financial aid for undergraduate students are its undergraduate tuition revenues, its annual
giving from alumni, other individuals, foundations and corporations that is available for
current operations and its spending from its endowment. Most institutions aim over long
periods of time to spend approximately 4 to 5% of the value of their endowments
(averaged over a number of years) each year.2 To be conservative and to try to minimize
the effect of endowment changes on spending, we use 4% in the calculations that follow.
The Council on Aid to Education collects data on annual giving to colleges and
universities, by planned use, each year. We were given access to these data for the 1969-
70 to 1999-2000 period for a large sample of American colleges and universities under
the condition that we keep the data for any individual institution confidential. Hence, in
what follows we report information grouped for the richest and poorest three Ivy
institutions. We also use giving data for 1999-2000 to approximate what giving for those
institutions actually were in 2000-2001, because the latter were not available to us.
The top panel of table 2 indicates that the average level of tuition and fees varied
only by about $366 between the richest and poorest three Ivies in 1990-91. While the
poorer three institutions’ tuition was higher, they also received an average of about
$2,450 per full-time student less than their richer counterparts each year in the form of
annual giving for current operations. The major difference in the level of resources that
each institution had to spend, however, came from the disparity in endowment wealth,
with the two sets of institutions averaging $52,390 and $305,350 per student in
endowment.  If each institutions had spent 4% of its July 1, 1990 endowment value in
                                                
2 For an explanation for why they do so, see Ronald G. Ehrenberg, Tuition Rising: Why College Costs So
Much (Cambridge MA: Harvard University Press, 2000), chapter 3.
41990-91, the poorer institutions would have averaged $2,096 in endowment spending per
student and the richer ones $12,214. Adding up the three sources of revenue, the richest
institutions would have averaged $33,912 in spending per student, while the poorer three
would have averaged $21,714. The difference of $12,198 is equivalent to the richer Ivies
having 56% more resources available to spend per student than the poorer Ivies.
As the bottom panel of table 2 indicates, in 2000-2001 the average tuition at each
of the two sets of institutions was over $25,000 and the difference between the two
averages was slightly more than $200. Average annual giving for current operations rose
at both sets of institutions, but the difference in the average per student fell slightly to
about $2,400.3 However, again assuming a 4% endowment-spending rate, average
spending per student from endowment at the three richest Ivies would have risen to
$44,463 and at the three poorest to $7,572. As a result, total spending per student from
the three sources would have averaged $79,058 and $40,000, respectively at the three
richest and three poorest Ivies. The gap in spending per student would have risen to
$39,058. The richer Ivies would have had an average of almost 98% more resources per
student to spend than the poorer Ivies had, up from 56% more a decade earlier.
Of course some of the increased spending that took place at all of the institutions
over the decade and some of the increase in the spending gap between the richest and the
poorest Ivies was due to general increases in prices, or inflation, that took place during
the decade. Between September 1990 and September 2000, the Consumer Price Index
                                                
3 In 1990-91, the average share of annual giving going to current operations was .544 at the richest three
Ivies and .560 at the poorest three Ivies. By 1999-2000, the respective shares had fallen to .399 and .470
respectively. Relative to the richest three Ivies, the poorest three Ivies were devoting relative more of their
annual giving to current purposes each year. The richer three Ivies devoted more of their annual giving to
building their endowments in each year (.489 vs. .396 in 1999-2000), which helped to widen their absolute
endowment advantage.
5(CPI) rose by about 30.9%.4 Hence viewed in terms of constant 1990 dollars, the gap in
resources between the richest and poorest Ivies that was attributable to the three sources
of funding grew to $29,838, widening by $17,640. Put another way, the richest Ivies
spending advantage relative to their poorer counterparts rose by almost 150% in real
terms.
Symptomatic of the growing disparity of financial resources among the Ivy
institutions was Princeton’s announcement in early 2000 that it was eliminating all loans
from its financial aid packages. Harvard and Dartmouth (the 4th richest Ivy institution)
quickly announced substantial, but not total, reductions in the loan component of their
financial aid packages. Yale, which earlier in the year had extended its need blind
admissions policies to all foreign applicants and guaranteed to meet the financial need of
all accepted foreign applicants (at an estimated cost of $2 million to $3 million a year)
announced that it was postponing a decision on reducing the loan component of its
financial aid policies for a year. The poorer Ivies, whose financial aid packages had been
more heavily weighted towards loans to start with, for the most part remained silent.
When you don’t have the resources there is little that you can do.
Undergraduate financial aid is but the tip of the iceberg. The richest institutions
ratcheted up their faculty members’ average salaries during the decade and the poorer
institutions strove mightily to remain competitive. In 1990-91, the average salaries of full
professors at the three richest and three poorest Ivy institutions were $84,800 and
$72,000, respectively. By 2000-2001 these averages had risen respectively to $128,300
                                                
4 The Higher Education Price Index (HEPI), a comprehensive price index for the higher education
expenditures rose by 41.0% between 1989-90 and 1999-2000. However, since academic institutions
themselves directly set the prices of many of the items that appear in the index, for example faculty
salaries, our discussion in the text is based upon the CPI inflation rate.
6and $106,700. So the richest Ivies increased their full professor salaries by 51.3% during
the decade, while the poorer Ivies raised their full professor salaries by about 48.2%; both
increases considerably exceeded the rate of inflation. As a result, the ratio of average full
professor salaries across the two sets of institutions rose from 1.18 to 1.20. While one
might marvel at how small the difference in growth rates of faculty salaries was at the
two groups of institutions, the difference in the growth rates of full-time faculty at the
two sets of institutions was much larger during the decade. The full-time faculty at the
richest three Ivies grew by an average of 5%, while the full-time faculty at the poorest
three Ivies declined by an average of 0.6% during the decade. The difference between
these two growth rates exceeds the difference between the two groups in the growth rates
of full-time enrollments during the period.
Arms races of university spending are likely to be self-ending, just as the actual
arms race between the United States and the former Soviet Union was. Just as the poorer
Ivies understand that they cannot compete with the richer Ivies across the board on
undergraduate financial aid, they also understand that they cannot compete across the
board on faculty salaries. However, to attract and retain the very best students and
faculty, the poorer Ivies will have to differentiate more both their financial aid offers and
their faculty salaries. Both preferential packaging in financial aid and merit pay in faculty
salaries will become more prevalent at them. Put another way, we expect to observe
increased dispersion in financial aid offers and in faculty salaries at each of the poorer
Ivies in the years ahead, as a direct result of the growing dispersion in endowment
wealth.
7Should one feel sorry for the poorer Ivy institutions? Not on your life! Although
they have become poorer relative to their richer Ivy competitors, they have become richer
relative to most of their other private competitors. The absolute differences between their
endowments per student and those of most of their private competitors have grown
during the decade of the 1990s. So more generally, in the future we expect to see even
more preferential packaging and direct merit aid, as well as greater faculty salary
differentials at institutions that rank below the Ivy League in terms of student selectivity
and endowment wealth.
Faculty salaries, student/faculty ratios and undergraduate financial aid are but
three of the many dimensions on which universities compete. For example, research
universities compete on the number and generosity of their graduate fellowships, on the
size of the start-up packages they are able to provide to new faculty in the sciences and
on the quality and size of their research facilities. As the dispersion of wealth widens
across research universities, greater dispersion across institutions in each of these
measures will occur.
8Table 1
Endowment Wealth in the Ivy League
July 1990 and July 2000
A.) Endowment Levels
July 1, 1990
Endowment
(billions of dollars)
July 1, 2000
Endowment
(billions of dollars)
Percentage
change over
the decade
Harvard 4.683 19.200 310%
Yale 2.585 10.100 291%
Princeton 2.475   8.400 239%
Columbia 1.516   4.260 181%
Cornell   .927   3.400 267%
Pennsylvania   .808   3.200 296%
Dartmouth   .654   2.470 277%
Brown   .441   1.440 227%
B.) Endowment Per Full-Time Student
July 1, 1990 July 1, 2000a
Absolute change
over the decade
Princeton $389,887 $1,322,626 $932,739
Harvard $281,481 $1,064,892 $783,411
Yale $244,676 $  947,201 $702,525
Dartmouth $137,353 $  480,078 $342,705
Columbia $104,286 $  259,835 $155,549
Brown $ 62,202 $  200,362 $138,430
Cornell $ 50,636 $  185,671 $135,035
Pennsylvania $ 44,337 $  181,870 $137,533
a Full-time enrollment in 1997, the latest year for which data is currently available from
WEBCASPAR, is used in the calculation for endowment per full-time student in this
column
9Table 2
Resources from Tuition, Annual Giving and Endowment Income
Available for Current Operations: 1990-91 and 2000-01
Tuition
and Fees
Giving Per
Full-Time Student
for Current Operations
Endowment per
Full-Time Studentd
Total Resources
per Full-Time
Studentc
A.) 1990
Top 3 Iviesa $15,023 $6,675 $  305,348 $33,912
Bottom 3 Iviesb $15,389 $4,229 $    52,392 $21,714
Absolute
Difference
$12,198
B.) 2000
Top 3 Ivies $25,259 $9,336 $1,111,573 $79,058
Bottom 3 Ivies $25,465 $6,964 $   189,301 $40,000
Absolute Diff.
in 2000 dollars
$39,058
Absolute Diff.
in 1990 dollars
$29,838
a Harvard, Yale, Princeton
b Brown, Cornell, Dartmouth
c Computed as tuition and fees plus giving per full-time student for current operations
plus 4 percent of endowment per student
d Computed for 2000 values using 1997 enrollment
Data sources
July 1, 1990 Endowment (CAE)
1990-91 Giving for Current Expenditures (CAE)
1990-91 Tuition & Fees (WEBCASPAR and UPENN website)
Fall 1990 Enrollments (WEBCASPAR)
July 1, 2000 Endowments (Chronicle)
1999-2000 Giving for Current Expenditures (CAE)
2000-2001 Tuition & Fees (US News)
Fall 1997 Enrollment (WEBCASPAR)
September 2000/September 1990 Consumer Price Index (BLS)


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