This matters precisely because increasing inequality is not the intent of policy makers or college leaders. Federal aid, state subsidies, and need-blind admissions all aim to make college open and affordable to qualified students regardless of economic circumstance. But other policies and practices used by colleges to attract students, including state-sponsored merit scholarships, tuition discounting, and admission preferences for children of alumni, often have the opposite effect — they exacerbate inequality.

To fully understand this profound shift in higher education, we must look to the recent past. Around 1970, the economic outlook for colleges seemed bleak. Costs were outpacing revenues, and the prospects for a return to good times seemed unlikely. The title of a 1971 report, “The New Depression in Higher Education,” summed up the dire circumstances.

A decade later, a university as seemingly secure as Duke was considering radical surgery to put itself on firmer financial footing. Duke’s chancellor, A. Kenneth Pye, proposed eliminating the university’s education and undergraduate nursing programs — two departments with significant enrollments — among other cuts. Arguing that Duke’s financial position compared unfavorably with public universities such as the University of North Carolina, which had been enjoying real increases in state appropriations, he advocated retrenchment as the only way for Duke to remain competitive.

Pessimism about the sector ultimately proved unwarranted, at least for colleges at the top of the prestige pecking order. Harvard and Stanford, both designated by the “New Depression” report as being in serious financial trouble, soon soared in resources and prestige. Duke did much the same, without resorting to many of the cuts discussed by its chancellor. Indeed, around 1980, most top colleges and universities, especially private ones, entered a period of unprecedented prosperity.

What happened? Earnings of households in the top rungs of income distribution began to swell, while incomes for almost everyone else stagnated. For the wealthiest colleges, this intensifying inequality returned a dividend that was as handsome as it was unanticipated. Part of the dividend resulted from the surge in the demand for places in these selective colleges. Another chunk was the rise in donations spawned by the new affluence. In a perfect illustration of the enigmatic Matthew effect (the tendency for the rich to get richer, so named by the sociologist Robert Merton for a New Testament parable), these new donations, because donors tended to give to their own alma maters, gravitated to the very institutions that needed them the least.The result is a system of baccalaureate education that is in many ways even more unequal than it was in 1970. Indeed, inequality among colleges is stunning in its extent and breathtaking in the variety of its manifestations.

In 2011 Slate and The Chronicle of Philanthropy listed the top 60 charitable donors. Of the top 10 philanthropists, five made gifts to universities, each of them over $100 million. The next dozen individuals on the list made an additional six gifts to universities, all $50 million or more.

The Slate 60 shows what a large share of the largest gifts go to higher education. Of the $34 billion in donations made to colleges in 2013 recorded by the Council for Aid to Education, roughly a sixth of the total went to just 10 universities. These 10 are a who’s-who of higher education: Stanford, Harvard, University of Southern California, Columbia, Johns Hopkins, Penn, Cornell, NYU, Yale, and Duke. In 2016, eight of these same universities again rankedin the top 10.

Prominent research universities have also, in recent years, announced and then met or exceeded increasingly ambitious capital campaigns. Cornell raised more than $3 billion, Yale raised $3.9 billion, Columbia more than $4 billion, and Stanford $6.2 billion. In 2013, Harvard announced a goal of $6.5 billion for a campaign that has now reached a record-shattering $8 billion.

In short, a significant consequence of the country’s unequal distribution of wealth, a phenomenon loudly decried by many scholars, has been to boost the ability of rich donors to give large gifts to the colleges that employ those scholars. It’s boom times for the very institutions that least need it.

To fully understand how profoundly unequal the college market has become, we need to drill deeper into how contributions to the best-endowed universities have changed over time. According to annual survey data collected by the Council for Aid to Education, there is continuity at the top end of the distribution — of the 12 colleges receiving the most donations in 1970, six were also among 2016’s top 12. Indeed, take a look at how donations to the historically richest colleges have diverged compared with those to all other colleges:

How Rich Colleges Extended Their Advantage
Dividing institutions by quartile (based on the amount [in millions] of donations they received in 1969-70) shows how historically rich schools maintained their advantage.

As the graph above shows, donations to the universities that historically received the fewest donations grew the most rapidly in percentage terms, but the inequities grew in absolute terms. The average university in the top quartile depicted above received $107 million more in donations than the average bottom quartile university in 1970; by 2010 the difference had more than doubled, to $266 million.

An extraordinary bull market in stocks has further exacerbated the inequality of colleges. Between 1980 and 1990 the Dow Jones industrial average increased, in inflation-adjusted terms, at an annual rate of 7.4 percent. In the following decade the Dow rose even faster — a spectacular 10.1 percent a year.

In turn, college endowments grew, especially at institutions with large endowments. In another example of the tendency for the rich to get richer, the universities that collected the most also made it grow the fastest. Work by Thomas Piketty suggests that, from 1980 to 2010, universities with the largest endowments enjoyed higher average returns than those with small ones. Endowments higher than $1 billion earned an average of 8.8 percent a year after inflation, while those endowments with less than $100 million earned just 6.2 percent.

Other studies confirm this conclusion. A 2008 Journal of Economic Perspectives article by Josh Lerner, Antoinette Schoar, and Jialan Wang showed that the eight Ivy League universities consistently outperformed other private institutions as well as public ones in their average rate of return. The Nacubo-Commonfund Study of Endowments showed that, from 2003 to 2013, the total investment returns were highest for universities with the biggest endowments and lowest for those with the smallest.

What explains this dollop of additional return for rich colleges?

Universities with the biggest endowments tend to put less money into safe investments, such as bonds, and more into riskier assets with higher average yields, such as stocks and real estate. In recent decades, the richest universities have significantly boosted their reliance on private equity, hedge funds, venture capital, noncampus real estate, natural resources, and distressed debt.

In 2016, for instance, universities with endowments of more than $1 billion held 58 percent of their portfolios in such assets, compared with just 10 percent for universities in the under-$25-million category, according to the Nacubo-Commonfund study. The Lerner, Schoar, and Wang study of endowment performance proposes an explanation: “While the SAT scores of a university’s students are unlikely to affect investment performance directly, average SAT score may be a proxy for the skill of the university administration, the wealth and connections of the alumni network, and the prestige of the university brand, all of which could affect endowment management over and above the role of endowment size.” However smug such a statement might sound outside Harvard and MIT (the authors’ affiliated universities), their hypothesized skill-connections-prestige explanation certainly jibes with correlations we can observe.A natural consequence of the vast disparity in donations bestowed on colleges is growing gaps in both expenditures and assets. Faculty compensation paints a revealing picture of this shift. There is a strong relationship between competitive admissions standards in 1970 and faculty pay more than 40 years later, according to data from the American Association of University Professors. Private universities that admitted students with the highest average SAT scores in 1970 paid an inflation adjusted average faculty compensation of $176,100 in 2011-12. Universities at the other end of the spectrum in 1970 did not grow as wealthy, paying an average faculty compensation of only $100,700 in 2011-12. A similar hierarchy was evident for the public universities, with average compensation ranging from $165,500 for the historically most competitive institutions, to $113,800 for the least competitive institutions. These figures reveal a rigid hierarchy of colleges, with the wealthiest consistently attracting the strongest students.

It may be unsurprising that the hierarchy that existed in 1970 was important so long afterward, but the gaps in faculty pay have grown larger, both relatively and absolutely. Compensation for full professors grew by an inflation-adjusted 32 to 36 percent at the most competitive private institutions from 1970 to 2011-12. For the less competitive tiers of universities, no grouping saw compensation grow by more than 30 percent.

While small resource gaps had always been in place, these changes remade our system of higher education. During the 1980s, the small edge that top private research universities enjoyed over their public counterparts grew larger, for instance, a trend that has continued to the present day.

Consider the case of two research universities in Illinois: Northwestern and the University of Illinois at Champaign-Urbana, the state’s flagship. In 1970-71, according to AAUP figures, the average compensation for full professors at Illinois was $22,200, 14 percent less than the average at Northwestern. By 1980-81, the gap had narrowed to 7 percent. But the fortunes of these two universities, like those of public and private research universities across the country, began to diverge over the next decade. By 1990-91 the gap in average compensation for full professors had risen to 20 percent. After holding at that level for a decade, the gap increased to 22 percent by 2015-16.

Much the same was true for the leading research universities in North Carolina. In 1970-71 average compensation for full professors at the flagship Chapel Hill campus was 6 percent less than that of its neighbor Duke. By 2015-16 the gap in compensation had mushroomed to 27 percent, making it very hard for UNC to recruit and retain the most sought-after faculty members.

These two examples illustrate a broader trend that can be seen in work by the economists Paul N. Courant and Sarah Turner on faculty salaries at Research I universities. The comparisons for full professors reveal a 5-percent advantage for the private universities in 1971 that held steady for a decade. By 1990 the advantage had grown to 12 percent, then 17 percent by 2000, then increasing all the way to 24 percent by 2015. In other words, the average full professor at a public university was now being paid just 76 percent of what a colleague makes at a private university.

No one in higher education had as their objective the increase in inequality that has occurred since 1970. Yet it happened nonetheless. Now colleges face tough choices. Selective colleges have the power to increase or decrease the share of their students who come from modest backgrounds. If colleges truly want to reduce the degree of economic stratification that exists in higher education, they should redouble their efforts to increase access.As the economists Caroline Hoxby and Sarah Turner have shown, there are hundreds of low-income, highly able high-school seniors, many of them outside metropolitan areas, who are waiting to be contacted and informed that colleges want them and that financial aid is available. To identify some of these students, college admissions offices should redirect more of their visits from affluent suburbs to nontraditional recruitment areas. In evaluating applications, they should do more to neutralize the advantages of wealth, such as by giving less weight to experiences, like unpaid internships, that are more accessible to well-to-do applicants. In making financial-aid offers, they should lessen or eliminate the debt burden on the neediest students. Lastly, they should reduce the preference they give to legacies.

As a practical matter, colleges have performed much the same role in America that they have everywhere in modern societies: to educate the children of the ruling upper-middle class and, in effect, to reproduce those elites. One need not be a Marxist to acknowledge this fact. Writing almost a half a century ago, the sociologists Christopher Jencks and David Riesman reflected on the role of colleges in balancing the imperatives of reproduction and mobility. Higher education, they argued, serves this country’s need “to prevent its elite from decaying into a hereditary aristocracy.”

To their credit, American colleges are more meritocratic than they were 50 years ago. Objective measures of academic merit have assumed a paramount role. Yet, rather than being a vehicle for social mobility, this system has worked instead to perpetuate the advantage of those in a financial position to do well on the tests.

Over the last half century, colleges have felt the force of sweeping changes: a technological revolution as well as a revolution in civil rights and widespread changes in gender roles. Immigration profoundly changed the racial and ethnic makeup of the population, and college enrollments.

Yet all the while the structure of the higher-education industry has remained remarkably unchanged. A durable hierarchy has undergirded this structure, a hierarchy measured in prestige and wealth. This hierarchy stretches from unselective colleges at one end, to a handful of elite institutions at the other. Colleges were and are unequal, only now they are more unequal than ever before.

Charles T. Clotfelter is a professor of public policy, economics, and law at Duke University. This essay is adapted from Unequal Colleges in the Age of Disparity, out this month from Harvard University Press.