Article
The Efficiency of Large(r) Endowments: The Optimal Endowment is Bigger Than You Might Think
Applied Economics Letters
(2020)
Abstract
This study argues that endowments can be efficient, both for a finite-lived and infinitely-lived agent. When the lost utility from forgone consumption is less than the discounted utility brought by the cash flows paid throughout the endowment, endowments are utility-enhancing. Given that this can be utility enhancing for a finite-lived person, the direct connection can be made to an infinitely-lived agent who would receive utility enhancement through an endowment, such as a university. Given the recent political push to force well-endowed universities to spend down their endowments, displaying how an endowment’s existence can be efficient is important for policy-makers.
Keywords
- Personal endowments,
- non-profit endowments,
- university endowments,
- Utility
Disciplines
Publication Date
September 19, 2020
DOI
10.1080/13504851.2019.1682507
Citation Information
Kurt W. Rotthoff. "The Efficiency of Large(r) Endowments: The Optimal Endowment is Bigger Than You Might Think" Applied Economics Letters Vol. 27 Iss. 16 (2020) p. 1362 - 1365 ISSN: 1466-4291 Available at: http://works.bepress.com/kurt-rotthoff/35/