What Effect Does Being a Historically Black College/University Have on Endowments?

Abstract This article estimates several causal counterfactual parameters of the effect of being an Historically Black College/University (HBCU) on college/university endowment, and on the probability of a college/university failing as a function of its financial health, which is proportional to endowment. Our various counterfactual causal parameter decomposition estimates suggest that the racial distinctiveness of HBCUs causes, and can account for cumulative HBCU/non-HBCU endowment disparities between $11.5 billion and $58.9 billion for the HBCUs in our estimating sample. This is consistent with, at least in part, racial discrimination against HBCUs in philanthropic endowment contributions/gifts. With respect to failure, as HBCU status contributes to higher failure probabilities that are a function of college/university financial health, reducing the HBCU/non-HBCU endowment disparity would also enhance the ability of HBCUs to continuously exist. We suggest two public policy interventions to close the endowment disparity. First, increase the tax subsidy for contributions/gifts to HBCUs relative to non-HBCUs, as a way to incentivize more gifts to HBCUs from wealthy foundations and individuals. Secondly, to the extent that the wealth of HBCU alumni—who give back to their alma mater at higher rates than their non-HBCU peers—has been constrained due to the legacy of Slavery and discrimination, a distribution of reparations to the descendants of Black American Slaves would close Black-White wealth disparities that could translate into larger endowment contributions/gifts from HBCU alumni.