College tuition vs. Medcare

An interesting post by Erica Alini at Real Time Economics:

Is Higher Education the Next Big Bubble?

We have been looking at the evolution of various components of CPI in the USA relative to the headline CPI itself. The college tuition and fees have been by far more powerful in price setting than medical care. Figure below demonstrates that the index for college tuition has increased by about 385 points relative to the CPI and the index for medcare by only ~160. Moreover, the index for tuition obtained an additional acceleration in 2001 as the slope increased. The index for medcate has practically the same slope or "relative pricing power".

It is likely that the index for tuition will gain another portion of pricing power after this recession as it happened twice already. One can see in the Figure below that the slope in the difference between CPI and the index for tuition has been increasing again since the mid-2008.

So, Erica Alini is likely right.

Figure 1. The difference between the headline CPI and the index for medical care (blue) and the index for college tuition and fees (red).

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