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This paper critiques the multifarious ways whereby academic qualifications may be falsified in the international marketplace. The objectives are fourfold: (1) defining the main terms used such as fake degrees and diploma mills; (2) providing a brief history of fake degrees and identifying the factors that explain their recent development; (3) developing a theoretical framework to analyze fake degrees; and (4) exploring the costs and benefits of this activity and its net impact on a given society. Degrees serve instrumental and ceremonial purposes. It is argued that degree holders may be considered as members of a club. They confer to their holders excludable but non-rival property rights such as abilities, signaling and status. The paper contends that holders of fake degrees can be considered as "free riders" on these property rights, especially the status tied to legitimate degrees.
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An introduction to the Economics of Fake Degrees
Gilles Grolleau, Tarik Lakhal, Naoufel Mzoughi
To cite this version:
Gilles Grolleau, Tarik Lakhal, Naoufel Mzoughi. An introduction to the Economics of Fake Degrees.
Journal of Economic Issues, Newfound Press, 2008, 42 (3), pp.673-693. �halshs-00326238�
An Introduction to the Economics of Fake Degrees
Gilles Grolleau, Tarik Lakhal and Naoufel Mzoughi
Publsihed in Journal of Economic Issues, Vol. XLII, No. 3, September 2008,
pp. 673-693
Gilles Grolleau is an Associate Professor at Montpellier Supagro and a
Researcher at the Laboratoire Montpelliérain d’Economie Théorique et
Appliquée (LAMETA, UMR 1135).
Tarik Lakhal is a PhD student at the Université de Bourgogne.
Naoufel Mzoughi is a Research Fellow at INRA Avignon.
The authors are particularly indebted to George Brown for his numerous detailed
and helpful comments. They are also grateful to Cesar Furtado, Deli Yang, Luuk
Van Kempen, George Gollin, Daniel Schugurensky, Jean Bourdon, Kristina
Lybecker, Sara Solnick, and partici- pants to the annual meeting of the Canadian
Economic Association (May, 27-29, 2005, Hamilton) for stimulating
conversations and suggestions. The usual disclaimer applies.
Abstract : This paper critiques the multifarious ways whereby academic
qualifications may be falsified in the international marketplace. The objectives are
fourfold: (1) defining the main terms used such as fake degrees and diploma mills;
(2) providing a brief history of fake degrees and identifying the factors that explain
their recent development; (3) developing a theoretical framework to analyze fake
degrees; and (4) exploring the costs and benefits of this activity and its net impact
on a given society. Degrees serve instrumental and ceremonial purposes. It is
argued that degree holders may be considered as members of a club. They confer
to their holders excludable but non-rival property rights such as abilities, signaling
and status. The paper contends that holders of fake degrees can be considered as
“free riders” on these property rights, especially the status tied to legitimate
Keywords: accreditation, diploma mills, fake degrees, and status good
JEL Classification Codes:
A23, A29, K11
“A fake degree is just the click of a mouse
and a cheque away.(Gillan 2004)
Evidence suggests that diploma mills have existed since the American Civil War,
with the trade in fake degrees currently reaching epidemic proportions throughout
the world. The growth in fake degrees has attracted the attention of the
international education community, including media, governments and
universities. Firms now hire specialized private services to verify college degrees
and other educational qualifications. Several countries have undertaken
investigations of their public service departments to assess the prevalence of fake
degrees and the results are frequently alarming (Cramer 2004). In January 2005,
two experts in the area called the fake degree business a “billion dollar industry
that has sold more than a million fake college diplomas” (Ezell and Bear 2005).
According to Bahur (2003), most individual diploma mill operators (estimated at
800) gross well over $20,000,000 per year and this figure rises each year.
Despite these alarming statistics, no attention has been paid to the
impact of fake degrees, although the falsification of other valuable
goods is well
documented (Grossman and Shapiro 1988a; 1988b; Frey 1999;
Liebowitz 2002;
Bosworth and Young 2006; Van Kempen 2003). To explore
these issues, this paper
investigates the following questions: What are fake
degrees and diploma mills? Who
produces fake degrees and who consumes them?
And, what are the costs and benefits
of the fake degree industry? Given that fraud
does not lend itself easily to standard quantitative analysis, official reports, case
studies, popular and educational press are
analyzed1. In parallel, we also explored
the literature devoted to counterfeiting, mostly
of branded products, in order to
assess how this theory can be applied to the business
of fake degrees. We
contend that degrees can be usefully analyzed by using the
dichotomy between ceremonial and instrumental institutions. Degree
holders can
be considered as belonging to a club. Members of this club benefit from
and non-rival property rights. These rights conferred by degrees include the
traditional functions of degrees, i.e., signaling and human capital functions, and a
studied use, that is, providing status. In some circumstances, holders of fake
are status seekers. Therefore, fake degrees allow their holders to “free
ride” on the
rights and benefits normally tied to legitimate degrees, without the
normal investment of human capital.
1 “A lot can be done with simple economic theory combined with historical or even journalistic
methods of empirical research as distinct from regression analyzing and other methods of empirical
research that use random sampling and statistical inference rather than anecdote and narrative”
(Posner 1993, 203).
The paper is organized as follows. In the next section, the definitions of
key terms are addressed, namely fake degrees, diploma mills and
accreditation mills.
In the third section, it is argued and demonstrated that
although fake degrees are an
old phenomenon, there is recent and significant
concern pertaining to their burgeoning increase. The authors offer several
reasons explaining this development.
The next section develops an analytical
framework to analyze how fake degrees may
allow their holders to free ride on
the rights tied to legitimate degrees. The fifth
section outlines the costs and
benefits that can be associated with fake degrees. The
economic viewpoint may
differ substantially from the legal and educational views that
frequently advocate
repressive policies. The final section provides several policy
implications and
The Nature and Definitions of Fake Degrees
According to Freedman (2002, 161), “definitions are indispensable to
communication, to the vital process of persuasion which underlines any academic
discipline. Economists must begin their own peculiar campaigns of persuasion by
getting their readers to abide by certain terminological choices. As a consequence,
a sign of maturity in any academic endeavor is the development of a widely
accepted distinct language composed of precise definitions.” In the world of fake
degrees, definitions are numerous and reaching a consensus is an elusive task.
Nonetheless, we offer an overview of available definitions in order to identify an
array of convergent constitutive elements for fake degrees and related concepts
(Table 1).
There are no definitive criteria to characterize a fake degree or a diploma mill
and the lack of consensus on terms may generate some confusion (Brown 2004).
We define fake degrees as counterfeit degrees bearing the names and signs of real
and fully accredited universities and/or degrees from bogus universities, sold
outright and that can require some academic work, but significantly less than
comparable, legitimate accredited programs. In other words, fake degrees are
defined by reference to unauthorized use of intellectual property. Our definition of
fake degrees includes both replica testamurs from bona fide institutions and
testamurs that can either be bought or earned with little work from an entity of
some description. The former definition corresponds to a business that markets
counterfeit degrees while the second definition corresponds to a somewhat legal
institution that produces its own products, i.e., that sells “degrees” that are both
real and sometimes legal, but not emanating from a recognized institution (for a
more elaborated discussion of this point see Brown 2001, 76-97). One may
question how counterfeiting theory applies to a legal entity that sells its legally
produced bogus degrees. Despite its usefulness, such level of precision is beyond
the scope of this contribution. Moreover, the point may be more difficult if we
introduce the fact that some bogus universities borrow intensively their “virtual”
presentation such as mission statement, front page, history section, domain name
and so on from real universities while delivering their own degrees (Gollin 2003).
In the following, we mainly focus on unaccredited degrees delivered by fake
schools, not on counterfeit degrees, i.e., fake MIT degrees.
Diploma mills are schools or universities selling or awarding diplomas requiring
less than the minimum level of standard academic work. Diploma mills are
unaccredited or accredited by “accreditation mills,i.e., by illegitimate
or unrecognized accreditors. Sometimes, other institutions delivering good
diplomas without full accreditation or non-traditional degrees (online
degrees) can be
labeled “diploma mills.” For example, an institution in the
United States may take
several years to obtain legitimate accreditation and may,
in the process, be
confounded with bogus universities and suffer from negative
reputational spillovers.
These last types are out of the scope of the present
contribution. Accreditation mills
correspond to statements made by
unrecognized sometimes only virtual – accrediting agencies that do not meet
the legitimate accreditor standards in
compliance with public regulations (see
Council for Higher Education Accreditation (CHEA) (2003) for more detailed
discussion). Such dubious procedures of
accreditation echo Juvenal’s statement:
“Quis custodiet ipsos custodes?(Who will guard
the guardians?) (Juvenal 120,
Satyres). The lack of coherence and harmonization in
national and international
policies and procedures for the accreditation of
institutions leaves an open door
for dubious quality assurance systems (Brown 2004;
Hallak and Poisson 2007).
Table 1: Overview of Terms and Definitions of the World of Fake Degrees
Terms and synonyms
Definitions and references
Fake degrees / diploma
Phony degrees
Counterfeit degrees
“A fake degree is just the click of a mouse and a cheque away”
(Gillan 2004)
“Counterfeit and substandard university degrees.” (Queensland
“Degrees (. . .) that are meant to give the impression of academic
achievement, but in reality represent little or no study” (Katz
Diploma / degree mills
Bogus universities
Phony universities
“A diploma or degree mill is an organization or individual
and selling diplomas, degrees, transcripts, or other
academic records that are meant to give the impression of
academic achievement, but in reality represent little or no study”
(Katz 2004).
“A diploma mill is a person or an organization selling degrees or
awarding degrees
without an appropriate academic base and
without requiring a sufficient degree of postsecondary-level
academic achievement” (Stewart and Spille 1986 quoted by Ezell
and Bear 2005).
“Non-traditional, unaccredited, post-secondary schools that offer
degrees for relatively low flat fee, promote the award of academic
credit based on life experience, and do not require any classroom
instruction.” (Cramer 2004)
“Diploma mills, sell academic degrees based upon life experience
or substandard or negligible academic work. Some diploma mills
require no academic work at all and merely sell degrees for a
fee.” (Cramer 2004)
“Diploma mills would not pass the initial screening of accrediting
organizations (review for eligibility, candidacy, or initial
accreditation) and thus fall outside the purview of these bodies”
(Council for Higher Education Accreditation (CHEA) 2003).
“A diploma mill, in its simplicity, is an unaccredited and
fraudulent institution of higher education” (Bahur 2003).
Accreditation mills
Unrecognized accreditors
“Accreditation mills would struggle with the pre-screening for
recognition and thus escape this scrutiny as well” (CHEA 2003).
“Accrediting agency” “not recognized by the US Department of
education.” (Ezell and Bear 2005).
“An accreditation mill typically is a firm that accredits schools
without onsite visits and has little to no requirements for granting
accreditation. Schools basically pay for the accreditation”
(Harrison-Martin 2004)
2 (accessed July 24,
Historical Overview of Diploma Mills and Fake Degrees
The history of fake degrees can be traced back to the time of the first
degrees. According to Ezell and Bear (2005, 30), “the earliest explicit
mention of
diploma mills is Wooton (1883) who complained about ‘bogus degrees
that may claim
to have issued from some university which is non existent
According to Wooton,
the selling of academic degrees was common place since at
least 1730. In 1876, John Eaton, a U.S. Commissioner of Education, called
diploma mills a “scandal and
disgrace to American education.”
In 1924, the U.S. Subcommittee of the Committee on Education and
reported that there were “at least 25,000 fraudulent doctors, doctors who
fraudulent (. . .) medical diplomas, practicing in the United States(Ezell
and Bear
2005, 31). Vaughan (1926) provides many interesting details on the
importance of
fake degrees and diploma mills in the medical profession.3 Several
attempts to close
diploma mills are presented but “the low-grade medical school
had too much political
influence at that time.” By 1957, the dubious Association
of Home Study Schools
representing many phony colleges and universities was
“claiming that total enrollment in their schools was 750,000 students, paying an
annual tuition of $75 million(Ezell
and Bear 2005, 32).
Ezell and Bear (2005) distinguish between two more recent periods in the
development of degree mills, primarily in the United States. The first period
includes two major events, i.e., the creation of a special department in the Federal
Bureau of Investigation (FBI), the DipScam (1980-1991) to address the problems
of diploma mills and the Pepper hearings. DipScam closed in 1991 when Allen
Ezell the official in charge of the department retired. According to U.S. official
sources (1985) quoted by Bear and Ezell (2005, 33) the issue was very
Applying the rate of bogus [health credentials] to all other occupations,
would be as many as 2 million bogus practitioners in the country
(. . .) The
American Council on Education estimates there are (. . .)
about 400-500
diploma mills in operation around the country (. . .)
The National Council for
Accreditation of Teacher Education
estimated that fully one sixth of all doctorates
in education were
phony. If one generalizes from this estimate to all doctorates
[in the past five years], this would translate to nearly 40,000 Americans
holding bogus doctorate degrees alone.
3 Burlingame (2005) reports the case of several diploma mills among medical schools in Kansas
such as the Kansas City College of Medicine and Surgery (opened in 1915)
The second period (1991 to present) is characterized by an “explosion” of
degree mill industry. Technological advances and globalized education/labor
markets have
dramatically increased the ease, speed and quality with which fake
degrees can be
made (see Marginson 2004 for a stimulating discussion). Distance
learning combined
with information and communication technologies have
created the optimum environment for both legitimate and, of more concern,
illegitimate universities to thrive. Historically, education services were mainly
provided at a local level making accreditation and regulation relatively easy. The
advent of the internet has reversed this trend, and the fake industry can now affect
all countries in the same way. Anecdotal evidence 4 supports that larger education
markets like the English speaking countries are more affected by the fake diploma
industry (Brown 2006) than smaller educational markets, e.g., the French speaking
market. For example, according to some sources quoted by Brown (2006),
employers suggest that “up to 25-30% of all résumés contain some falsehood
about claimed qualifications.”
Degree mills have expanded their operations across the globe (Ezell and Bear
2005) in many countries benefiting from a concurrent “technology push” and
“degree race.” Indeed, digital technology in a globalized market has made the
design and production of fake credentials easier and cheaper than ever before. The
use of “documents such as certificates and diplomas to facilitate the decision-
making process
as opposed to personal interviews and informal recommendations
(Brown 2006; see
also Zucker 1986) has reinforced the impersonal
relationships allowed by digital
technology. Moreover, degrees frequently
constitute a major determinant of an
individual’s rank in the competition process
in order to obtain a given position and
subsequent earnings (Hirsch 1976).
Furthermore, degree mills have developed several
measures aimed at reassuring
consumers such as accreditation mills. While the
problem of diploma mills and
fake degrees is acknowledged as being serious, it is
difficult to estimate their
full impact because it is an illegal activity and there is an
obvious lack of data
and rigorous studies. Several official investigations point to the
magnitude and implications of this dubious activity (Table 2). These
investigations appear to underestimate the expanding scale and dimensions of
this multimillion dollar industry.
Anecdotal evidence includes pieces from several sources, such examples, case studies and
reported in books (e.g., Ezell and Bear 2005), reports (e.g., Hallak and Poisson 2007),
academic articles (Brown 2006) and numerous newspaper articles (see Table 2). Rather than a
systematic and quantitative evaluation of fake diplomas (see Table 3), several contributions emphasize
individual cases where a priori “trustworthy” individuals, e.g., the MIT admission dean, have been
convicted of using fake and misleading credentials (Bombardieri and Jan 2007).
Fake Degree Holders as “Free Riderson the Rights
Tied to Authentic Degrees
Veblen has proposed a distinction between instrumental and ceremonial
institutions that may be used to inform the analysis of (fake) degrees. In
Veblenian terms,
institutions stem from instincts of individuals that can either
support the life process
generally (workmanship, idle curiosity, parenting) or
provide contaminants” of that
process (predation, invidious emulation, vested
interests) (Tool 1998). “Good”
instincts lead to instrumental behavior that is
problem-solving behavior (e.g., scientific
discoveries, technical innovation), while
“bad instincts lead to predatory and
ceremonial behavior (e.g., conspicuous
display). Many behaviors frequently result from
a mixture of these two
components and the role played by particular institutions in
determining actions
is a question of identifying what component instrumental or ceremonial
dominates (Bush 1987). We contend that the drivers behind the
acquisition of
degrees draw from ceremonial and instrumental aspects. Indeed, as
below, degrees confer to their holdersdifferent kinds of benefits that may
return drive them to seek their acquisition.
Degrees confer to their holders several property rights not available to those that do
not hold these qualifications. If we retain the distinction proposed by Furubotn
and Pejovitch (1972) about property rights, degrees transfer to graduated
the right to use the degree, e.g., to get a job or acquire a social status
(usus) and the
right to appropriate the returns from the degree (fructus), e.g.,
obtaining a wage
increase thanks to a given degree. A significant driver behind
the purchase of fake
degrees are the hopes of generating additional income and
not necessarily the utility
or human capital they yield (e.g., skills acquisition). For
example, Hallak and Poisson
(2007) report on cases of recruitment or increased
salaries based on fake diplomas (in
Liberia, six teachers were found guilty of
having bought their degree). Due to these
fake degrees, they received a total
US$29,702 in additional pay, with individual
amounts ranging from US$2,300
to US$7,200. The role of degrees as determinants of
merit in labor markets can be
questioned. In this perspective, analyzing the purchase
of fake degrees as an
investment decision is more accurate than as a consumer good.
Table 2: Some Official Investigations on Fake Degrees and Diploma Mills
and found about 1,200 resumes that included degrees
14 of 43 diploma mills.”
for information and provided records that identified
students employed by the federal government. Two of the
schools provided records that federal agencies paid them
0 for the fees of federal employee students. (. . .) Data
vided by 8 agencies indicated that 28 senior-level employees
degrees from diploma mills and other unaccredited schools.
. .) However, for reasons set forth below, this number is
d to be an understatement of the actual number of
es at these 8 agencies who have degrees from diploma
and other unaccredited schools.”
scandal of fake academic degrees. The credentials of
of public servants have been cast into doubt;
have faced disciplinary action, including a Knesset
ber and a senior official in the Department of education.”
El Salvador
credentials (. . .). Under mounting pressure to clean up El
judicial system, the Supreme Court in recent weeks
suspended Canas [a Salvadorian judge] and 37 other judges
allegations that they do not have legitimate law degrees.
officials said the purge could affect 40 percent of the
628 judges.”
and diplomas as the latest census revealed at least
people are using fake education documents.”
themselves into dentists and use false documents; others
te under a false name.”
Reuters Health
degrees and certificates to get promotions and raises, state-
media reported. A total of 1,076 got demoted and
97 were dismissed from the police force for falsifying
education and training (. . .). In recent years, thousands of
vernment civil servants have been caught falsifying their
The Asian
a Phony dentists a major problem in Italy. Northwest Community Healthcare, Reuters Health,
March 20, 2003. (accessed July 24, 2006).
bMore than 1,700 police found using fake degrees. The Asian Reporter, January 04, 2005.
Obtaining a degree does not confer to the holder the right to change its form
and substance (abusus), and the right to transfer each of the three previous
mentioned rights to another party (successionis). Note that these rights are
frequently assigned to
legitimate institutions, such as universities or other bodies
that can change the nature of the degree or attribute a similar degree to another
individual. More formally, the
property rights embedded in the degree make
the benefits from being graduated
excludable and non rival. Therefore, holders
of legitimate degrees can be considered
as members of the same club (Buchanan
1965). Several sub-clubs can be distinguished
such as the club of doctors for all
people holding Ph.D.s regardless of the field or the
graduating institution and the
sub-club of doctors in economics from the
Massachusetts Institute of
Technology. Analyzing communities of graduated individuals with analytical
tools derived from club theory (Sandler and Tschirhart
1997) constitutes a
challenging but promising area of research.
In addition to traditional and well studied functions of education, i.e., the
signaling function (Spence 1973) and the human capital function (Becker 1964),
degrees can be considered as delivering a certain prestige or social status (Hirsch
1976; Marginson 2004; see Solnick and Hemenway 1998 for empirical evidence).
In a positional society, as wealth increases, consumers are not driven by their basic
material needs, but by the attainment of “the esteem and envy of fellow men”
(Veblen 1899). Goods are thusly valued more for their role as markers of relative
success or social status than for their intrinsic properties. Obviously, degrees are
“attention- getting” goods in some human groups (Fershtman 2006). Applying
Veblen’s (1899) argument upon degrees rather than on wealth, he contends, “in
order to gain and to hold the esteem of men it is not sufficient merely to possess
wealth or power [or education]. The wealth or power must be put in evidence, for
esteem is awarded only on evidence” (Veblen 1899, 23). Degrees confer esteem to
their holders, including honor and achievement. But, to gain status, an individual
must display this claim. Exhibiting or displaying the degree achieves this, because
degrees have no social meaning if they are not displayed.
In modern societies, education is a marker of status. Consumers seek degrees
show that they are members of a class above (holders of the same degree)
and to
distinguish themselves from those below (holders of lower degrees).
These two motives are directly inspired from Veblen’s distinction between
emulation” and “invidious comparison.Pecuniary emulation arises
when an
individual from a lower class consumes conspicuously to imitate a
member of the
upper class and invidious comparison occurs when an individual
from a higher class
consumes conspicuously to distinguish himself from an
individual from a lower class
(Fershtman 2006). According to Marginson (2004,
178), the “struggle for status is a
powerful motivating force for both students and
institutions in higher education, i.e.,
in relation with both ‘supplyand ‘demand’.
Status goods confer happiness to their holders only at the expense of others who
consume less of the good and are duly
The three functions or drivers mentioned above (i.e., signaling, human capital
and delivering status) are not mutually exclusive and are likely to be mixed in
individual decisions. When the purchase of fake degrees constitutes an investment
decision rather than a consumption act, it questions the role played by degrees in
labor markets. As outlined above, in a material economy, degrees ensure skill
acquisition or signalling unobserved characteristics such as individual ability.
Interestingly, if an individual for several reasons possess desired skills or abilities
(e.g., learning on the job, innate abilities) using a fake degree to get the position
can be seen as beneficial. Indeed, it lowers the overall cost of training and
selecting people. Despite some anecdotal evidence, we contend that this situation
is more the exception than the rule. In a positional world, irrespective of their
ability to demonstrate skill abilities or signal unobserved characteristics, degrees
matter not for themselves but in comparison with others’ degrees. This degree
race, like the well- known military arms race can cause significant welfare losses
(Frank 2005).
Fake degrees may allow fake graduated individuals to free ride on benefits
procured by legitimate degrees. In other words, individuals with fake credentials
benefit from club benefits without incurring the “membership coststhat
ensures effective exclusion. On the supply side, i.e., bogus institutions,
the marginal
cost of producing a fake degree is very low and varies according
to the services
delivered e.g., transcripts, recommendation letters, and
verification services but
remains very cheap compared to the equivalent
legitimate degree. On the demand side, if the fake degree is a consumer good
conferring mainly status benefits, the
individual balances the utility resulting
from the fake degree against the incurred
costs. The costs here are broadly
defined and include the purchasing costs but also
other “costs, such as
psychological costs associated with the fear of being discovered,
and stigmatized.
If the degree is considered as an investment good tied to earnings,
the individual
weighs the present value of costs associated with a fake degree
acquisition against
the present value of additional earnings/benefits earned by virtue
of that degree.
Without purporting to be exhaustive, such a free riding behavior can arise at
different levels, not mutually exclusive. First, degrees frequently confer to their
holders several exclusive rights such as titles (e.g., doctors or engineers). Such
titles provide to their holders several benefits such as the possibility to signal
developed skills, access to certain positions or responsibilities, wage increases,
prestige and social status. Fake degrees allow individuals without legitimate
degrees to claim titles and to profit from the prestige and other related rights.
Second, fake degrees are frequently delivered by institutions that bear names that
resemble those of reputable accredited schools (e.g., Columbia State University vs.
Columbia University, Loyola University vs. Loyola College). Diploma mills free
ride on the reputation of these legitimate institutions (Ezell and Bear 2005).
Degrees can thusly be considered in a simplified three-dimensional attribute
space, i.e., signaling ability, human capital formation and positional benefits.
credible legitimate degree ensures that functional and positional attributes are
than minimum levels. We assume that an individual purchasing a fake
degree gets
none of the human capital formation, but can attempt to deceive
employers or recruiting education institutions and/or fool the eyes of
others. Hence,
a fake degree allows to free-ride not only on the functional
attributes of legitimate
degrees but also on the positional attributes (Hallak and
Poisson 2007; Van Kempen
Costs and Benefits of Fake Degrees for the Main Stakeholders
It is well documented that the fraudulent consumer good industry imposes
significant costs and confers a variety of benefits to several stakeholders. These
stakeholders consist of consumers of the fake goods, legitimate producers and the
society as a whole. Without purporting to be exhaustive, the costs and benefits for
the higher education sector (namely universities) may be as follows: (1) those
universities whose degrees are more or less directly faked; (2) consumers who
knowingly or unknowingly purchase fake degrees that are inferior to the original
or legitimate degrees; and (3) the economy more generally.
Costs of Fake Degrees to Legitimate Right Holders
Costs to legitimate universities. There are obvious costs to universities
because they can be forced to compete directly against degree mills for market
share. First, consumers’ resources investing in purchasing fake degrees may be at
least partially considered as tuition losses for legitimate institutions. Although we
provide some raw estimates about the business of fake degrees (Table 3), reliable
data are scarce for obvious reasons.
Second, legitimate universities incur significant expense protecting their
intellectual property rights by conducting investigations and mounting litigation
against fakers. The budget for anti-counterfeiting is rarely well defined within
organization, but spans across several departments making a precise evaluation
difficult (Organization for Economic Cooperation and Development (OECD)
They also incur protection costs to design degrees that may be more
difficult to
counterfeit. Third, fake degrees are likely to generate negative
reputational spillovers
and project a negative image on legitimate universities,
especially for non-traditional
institutions such as distance learning and virtual
schools. In turn, legitimate institutions, especially web-based distance learning
institutions may experience
difficulties in signaling their quality and lose future
sales or ability to charge price
Table 3: Some Estimates of the Business of Fake Degrees Worldwide
Number of unaccredited universities
300 operating on the U.S. market (800
operating worldwide)
Number of accrediting agencies that, as
of late 2004,
are not recognized either
by CHEA or by the U.S.
of Education
> 200
Aggregate income of diploma mills
> $200 million a year
Usual price for a fake degree (Ms, PhD)
From $100 to $5000 with an average cost of
Number of fake degrees sold
More than 2 million fake degrees in United
States alone
Sources: Bear 2004; Ezell and Bear 2005; Bertereau 2006.
At this stage, distinguishing high quality institutions from low quality
institutions allows us to go further in the analysis (Akerlof 1970). Indeed, it
intuitively convincing that diploma mills compete directly with low
institutions rather than with high quality institutions. Low quality degree
institutions must invest in reputation to distinguish themselves from diploma
mills. Because of
diploma mills, their perceived value falls, making it harder to
price high unless they
show that this spending increases reputation. We
assume that employers cannot (without incurring additional costs) tell low
quality institutions apart from diploma
mills. Rather than practicing a wage gap
between individuals with fake degrees (Wf)
and individuals with low quality
degrees (Wl), the wage paid to both groups (W) is the
average of the two wages
that would be paid if detection was perfect. The probability
of having a fake
degree (pf) is common knowledge. This average wage paid to both
fake degree
holders and low quality degree holders will be lower than the wage that
the low
quality degree people would get under perfect detection. In equilibrium where
degrees are not distinguishable, the wage will be:
W = (1- p
) W
+ p
Because of this phenomenon those who ideally want low quality degrees and the
proper wage associated with it will either opt for the high quality degree or the
fake degree (Akerlof 1970).
Costs for consumers. Consumers can be harmed by fake degrees
they could have bought them without being aware of their falsified
nature. Indeed some diploma mills invest significant resources in delivering fake
degrees that give
consumers the perception that the delivered degrees are true
ones. For instance, they
can require from students some work, e.g., writing
papers, sufficient to generate the
perception that delivered degrees are true but
lower than the standards expected of
legitimate degrees. Moreover, they
frequently propose to convert previous work or life
experience into accredited
university degrees.5 “Degree mills are very skilled at playing
a word and legal game
in making themselves appear legitimate” (Markiewicz 2000).
Sometimes, an
individual attends a virtual university he believes to be accredited, but
institution turns out ex post not to be accredited at all (or accredited by a bogus
accreditation institution). This is a particularly relevant problem in many
countries, where control over the higher education system is weak
and substandard private “universitiesare proliferating. Diploma mills may also
advertise in well-
known magazines such as the Economist6 in order to induce
false beliefs in
consumersmind. “Because of magazine reputation, many readers
assume if a school
advertises in the Economist, it must be OK(Bear 2004).7
The counterfeiting of a degree for status reasons deceives not only the
individual who knowingly purchases the fake degree, but also the observer who
sees the fake degree being consumed and is duly impressed (Grossman and Shapiro
1988a, 82)8. Consumers are generally left without any legal recourse and are likely
to incur extra- cost, such as shame and image loss. Fake degree holders may also
harm legitimate degree holders because they are forced to compete unfairly with
5 See for example the Belford University website (accessed May
26, 2005)
6 “The Economist is one of the worst offenders. Every weekly issue for at least the last five years
has had 20 ads for schools that range from totally phony to merely unaccredited and bad” (Bear
7 The magazine or newspaper decision to run an ad of a phony school deserves further attention.
Indeed, the concerned media have to balance the opportunity costs of running such an ad against
that of refusing it. Several factors are likely to play a significant role such as the transaction costs to
identify ads of diploma mills and the potential reputational loss resulting from running such ads
8 The contributions of Grossman and Shapiro (1988a; 1988b) do not explicitly consider fake
degrees but more conventional counterfeit products, e.g., jeans
holders of fake degrees. Other consumers of fake degrees know exactly what they
buy and the purchased degrees are non-deceptive. To counter the falsification of
legitimate degrees some costs incurred by legitimate institutions to increase the
reputation and strengthen enforcement are passed on to consumers, which is
Costs to the broader economy. The economy of a given country may
suffer from recruiting unskilled people as shown by several examples and surveys
(e.g., Cramer 2004). Fake degrees may cause a cascade of negative consequences
especially when they are used in some jobs such as doctors or professors. As
reported by CBS,9 holders of fake degrees occupy positions as “safety engineers at
nuclear power plants and biological weapons experts. They work at NATO
headquarters, at the Pentagon and at nearly every other federal agency.” It seems
obvious that a lack of competencies in such jobs could have dramatic consequences
(Geber 1999; Armour 2003).
Several years ago, Bear testified at the trial of a Florida man who bought a
degree for $600 and worked for several years as a psychologist in the Florida
penal system. He was unmasked by a suspicious colleague who called the state
board of licensing and discovered he had no license or training in psychology.
In another case, Bear says, a man in Syracuse, NY, with a high school
education bought a $100 Ph.D. degree from the Universal Life University, a
religious degree mill. He then opened a sex- therapy clinic and, as the head
“doctor” counseled unsuspecting patients. He was finally discovered when a
dissatisfied client called the state medical board, triggering an investigation.
(Geber 1999)
Fake degrees are frequently used to gain unfair advantages “with the intention of
gaining corrupt entry into professions where competencies, honesty and trust are
essential” (Gollin 2003, 108; Elton 2002). According to Markiewicz (2000), “at
least three percent of all doctorate degrees [in U.S.] in occupational safety and
health and related areas came from either a diploma mill or a degree mill.”
Employers are likely to spend more resources to check the legitimacy of degrees
presented to them for employment. Similarly, governments in countries where
counterfeits are sold may also have to spend increasing amounts of money in
funding investigation and enforcement operations. When fake degrees are
9 We do not discuss what determines the probability of success/failure of deception on the part of
the fake degree holder, even though these are crucial for the welfare outcome (see Van Kempen
2003). (accessed October 5,
widespread in a given country, they may generate negative spillovers and tarnish
the image of all degrees from this country. Fake degrees have the potential to
threaten the whole education system because individuals may believe that every
diploma could be a fake or poorly accredited. While several other reproaches are
easily formulated against the industry of fake diplomas such as reducing tax
revenues because operations are achieved in the “black economy,” their effect on
social welfare sensu stricto is not obvious.
Benefits of Fake Degrees
Unlike the legal and educational viewpoints that consider that fake products
do not generate benefits and tend to prescribe repressive policies, an economic
suggests that fake degrees may have some beneficial effects (Frey 1999;
Barnett 2005).
Benefits for legitimate universities. In some cases, fake degrees may
increase demand for legitimate degrees, resulting in an overall higher demand.
instance, if holders of fake degrees anticipate screening of their
qualification will
occur and they may be discovered with the fake qualification,
e.g., resulting in being
fired or shamed, they can decide to substitute their fake
degrees with legitimate ones.
Although the economic literature has suggested
some other mechanisms the so-
called “exposure effect(Liebowitz 2002), the
price discrimination in the presence of
network externalities (Slive and Bernhardt
1998) by which counterfeiting may
benefit the original industry, these are
unlikely to apply in the case of fake degrees.
Moreover, recent empirical and
theoretical contributions cast doubt on the validity of
the previous arguments
(King and Lampe 2002). A third argument related to the
counterfeiting of
fashion goods has been proposed by Barnett (2005, 1422) to explain
how piracy
may profit the pirated firm. The argument, to a limited extent, can be
applied to
fake degrees:
Consumers’ preferences for the status benefits conferred by fashion
goods, and the resulting interdependence of consumer purchasing
behavior, give rise to the possibility that fashion-goods producers may
prefer some counterfeiting to no counterfeiting at all, irrespective of
enforcement costs. This unusual outcome may arise for two reasons.
First, the introduction of copies, provided they are visibly imperfect, may
increase the snob premium that elite consumers are willing to pay for a
fashion good. Second, the introduction of copies may lead non-elite
consumers to adjust sufficiently upward their estimate of the status
benefits to be gained by acquiring the relevant good, thereby translating
into purchases of the original. Both effects would increase the producer’s
revenues on sales of the original: the first by increasing price per unit, the
second by increasing total units sold.
Anecdotally, unexpected benefits can arise such as the case of the
executive David Geffen who once used a fake degree from the
University of
California, Los Angeles to obtain his first position in the
entertainment industry. He has subsequently repaid his fictitious alma mater with a
donation of $200 million.10 Of course, the benefit reported here relates to the
donation given to the University of
California, independently of other effects
that may make the overall effect less
In a world without fake degrees, some consumers who would decide not
obtain a high quality degree will get a high quality degree as their second
Having fake degrees can also harm the reputation of low quality
institutions, giving
high quality institutions protection from their low quality
competitors. Degree mills
may also create an entry barrier for low quality
institutions who are trying to become a
high end institution.
Benefits for consumers. Consumers that knowingly buy fake degrees can
either experience a utility gain from such fakes, possibly at the expense of others11
or expect returns from an investment decision or both. The utility gain can include
prestige, self-improvement, and status attainment and is reflected in the
individual’s willingness to pay. The benefits from the investment decision include
the ability to qualify for a higher paying job.12 High ability workers unable to get
the original degree because they cannot assume its costs may gain utility from
buying a fake one at a lower cost. By preventing diploma mills, low-quality
products that could otherwise be marketed to the benefit of both buyers and sellers
are precluded from sale. Given that degree seekers are rational agents (Becker
1968), they decide whether to pursue a legitimate degree or a fake one on the basis
of a cost-benefit analysis. This involves comparing expected costs to earning a
legitimate degree (i.e., years of schooling, tuition costs and so on that will allow
10 Reported in Nature, May 16, 417 (2002): 214
11 Some purchasers of fake degrees may seek psychic satisfaction only, regardless of any desire
to fool someone else.
12 It is frequent to pay higher wages for people holding higher degrees, sometimes regardless of
the job itself. For example, “Huron teachers with a master’s degree are paid $69,369 annually. For
those with a doctorate, the salary increases to $ 83,243 annually” (Harrison-Martin 2004). For
empirical evidence, see also Ferrer and Riddell (2002).
degree requirements to be met) with the costs of buying a fake degree (i.e.,
purchase cost, penalties, potential shame and so on that can be at least theoretically
monetarized) and choosing the least-cost option. Holding fake degrees will only be
sanctioned within the terms of a certain probability. The costs of buying a fake
includes the purchase cost and the statistical expectation of the sanction s = pL,
where p is the probability of being detected and L the severity of the punishment.
Being detected means that the individual will lose the additional earnings
associated with the degree and possibly the position itself. According to
Bombardieri and Jan (2007), the “most celebrated and outspoken admissions dean
in America, Marilee Jones of MIT, has resigned after acknowledging that she
fabricated her academic credentials.” The costs to the individual are difficult to
quantify but anecdotal evidence suggests they are severe in the majority of cases.
Benefits to the broader economy. The production and distribution of fake
degrees constitute an economic activity in itself and, as such, may provide
benefits to the economy of the country where it takes place. For example, fake
may generate considerable economic activity in other sectors, such as
postal services
and advertising. Anecdotal evidence shows that well-known media
such as the
Economist, Time, Newsweek, Forbes, Money, Business Week,
Investors Business
Daily and USA Today run ads for diploma mills (Bear 2004).
Accordingly, this activity
could be considered as an offsetting “benefitwhen
assessing the net impact of
counterfeiting on the economy (The Allen Consulting
Group 2003).
The Net Impact
Although theoretically possible, the circumstances under which fake degrees
welfare enhancing are unlikely. In other words, social costs imposed to all
stakeholders are prone to far exceed the social benefits resulting from such
While it can be argued that consumers benefit from counterfeiting
because they gain
access to degrees that they would otherwise have to pay (more)
for, this is a short term benefit that needs to be balanced against the considered
significant costs to legitimate
institutions, the harm inflicted on people (enterprises
or individuals) who are fooled,
and the longer-term costs to the whole economy. In
particular, acceptance of property
right violations undermines the fundamental
rule of law that underpins most modern economies (Grossman and Shapiro 1988b;
The Allen Consulting Group 2003).
Policy Considerations and Concluding Remarks
Several policy considerations can be drawn. First, a counterintuitive insight is
consider that fake degrees may satisfy economic needs that do not necessarily
with legal issues. Indeed, some degree sellers indicate on their web site
that they sell
fake degrees “for novelty purposes only.” Such mentions may
exempt the bogus
institutions from legal issues and make the consumer informed
of the real nature of
the purchased good. The claim “for novelty purposes only
transfers the problem to
another place where individuals buy fake degrees for
“non-novelty purposes.”
According to the distinction suggested by Grossman and
Shapiro (1988b), these fake
degrees are non-deceptive ones unlike deceptive fake
degrees where purchasers are
misled by bogus institutions claiming that they
deliver true, recognized and legitimate
Second, using fake degrees is not a victimless activity. Among numerous
points, fake degrees may devaluate legitimate institutions, deceive potential
students and employers (or universities) who hire (enroll) employees (students) that
do not have the expected qualifications (degrees). In 2000 a survey of 1,500 top
British companies found that 49% were concerned about applicants lying about
qualifications (Gillan 2004). Several investigations have stressed that significant
amounts of public funds are wasted to finance the purchase of fake degrees by
officials (Ezell and Bear 2005)13. From a legal standpoint, protecting the rights tied
to legitimate degrees seems compulsory while economists prescribe a cost-benefit
analysis (see Frey (1999) for an insightful economic analysis of the differences
between the legal and historic views and economic reasoning). The effectiveness of
the exclusion device is justified if the welfare gains from protecting, minus
protection costs, are higher than the welfare losses caused by a “laissez-faire”
approach (Coase 1960). “Zero fake degrees” whilst theoretically reachable, may not
be desirable from an efficiency viewpoint because the marginal cost of fake
elimination would be extremely high for the last units of fakes, and the marginal
benefits would be very low. The resources allocated to decrease the number of fake
degrees should be set equal to the pecuniary value of the marginal social damage
caused by the existence of fakes, at the point of optimal level of fakes. At this point
the net benefits to society will be the greatest. However, determining the optimal
level of fakes seems difficult (due to difficulty in measuring the value of the
13 See also the 2004 report of the U.S. Senate Committee on Homeland Security and
Affairs: Bogus Degrees and Unmet Expectations: Are Taxpayer Dollars Subsidizing
Diploma Mills? (accessed
February 8, 2005).
damage and the cost of eliminating it completely). The measurement of costs and
benefits can be further complicated because of the several uses of fakes. Indeed, if
someone buys a fake just for prestige, the social cost may be lower than its use to
obtain a wage increase or an employment position.
The identification of degrees that are both counterfeit and socially damaging
essential. Such identification may enable an increase in the efficiency of
resources. Indeed, “blindresearch can be very costly while “targeted
research may
economize on transaction costs. At first glance, diplomas that allow
one to obtain an
employment position in “credence services(Darby and Karni
1973) are more likely
to be counterfeit. Indeed, credence services frequently
involve “causal ambiguityon
the sources of deficiencies, making the holder of
a fake degree less likely to be
detected. Anecdotal evidence supporting
without proving this hypothesis may be
found in the contribution of Gollin
(2003). Consumers of such services cannot check
the quality of the delivered
services. Moreover, non-traditional institutions, e.g.,
distance learning
universities that are legitimate ones are more likely to be threatened by diploma
mills. A refinement of these criteria can help enforcers such as public
authorities to target their efforts toward sectors where fake degrees are used
frequently and socially harming.14
Third, the rationale for protecting degrees is relatively close to that of patents.
Legitimate institutions invest in establishing credible degrees. Repeated
consumption by satisfied consumers in a broad sense, e.g., prospective students
and recruiters
generates goodwill and reputation. When governments grant
institutions exclusive
property rights to their degrees, they protect institutions
investments. Without such
protection, institutions would find it difficult to
appropriate the benefits from maintaining the quality of their degrees and
would have less incentive to do so
(Grossman and Shapiro 1988b). Such
enforcement is likely to benefit from economies
of scale and learning by doing.
Consequently, legitimate institutions and accreditation
bodies (which may be
considered as “host clubs”) may have interest in fighting fake
degrees at a
collective level rather than individually. Identifying the agent(s) who can
the selected level of protection at the lowest cost constitutes a challenging
Fourth, the development of fake degrees is likely to generate an increase of
transaction costs on both sides of the degrees related transaction, i.e., the supply
and demand sides for genuine degrees. On the supply side, in order to protect
property rights on degrees, implied institutions, e.g., legitimate universities,
accreditation bodies, are likely to engage in procedures to prevent fakers to “free-
14 An obvious candidate where the use of fake degrees is likely to be socially detrimental is the
ride” on their business and reputation by undertaking investigations, litigation and
so on. In several countries, institutions have engaged resources in order to fight
fake degrees, such as outlets informing potential students on how to distinguish
legitimate degrees from counterfeit ones.1514 On the demand side, fake degrees
notably interfere and disturb the signaling/screening functions of legitimate
degrees and their use as minimal quality standards. Indeed, job-seekers have to
incur additional costs to signal their competences and recruiters spend more
resources to detect fake degrees. This situation opens a new area for firms
proposing verification services (Brown 2006). For example, recruiters may have
recourse to the competences of specialized firms such as Kroll MIE
( or Verifdiploma ( whose core business
is to check the legitimacy and validity of degrees presented by job applicants. Note
that universities are also “recruiters” and can be victims of students with fake
degrees. For example, Clayton (2003) reports the decision of the University of
California to give special attention to all overseas applications because of several
fake transcripts submitted by Chinese students.
Last, but not least, normative economics literature models the detection probability
p and the penalty L as constituting the variables of available political
from which the regulator can start in order to discourage the use of fake
degrees (Becker 1968).16 The regulator can, therefore, either raise the probability
detection and conviction – for example via an increase in the monitoring
and/or by applying advanced monitoring technologies, or by changing
legal rules to
increase the probability of conviction (e.g., requiring less
evidence) and/or the
severity of the monetary or non-monetary sanction
(e.g., increasing the level of
penalties or shame imposed on holders of fake
degrees). It is suggested that in order to save on detection costs, an arbitrary
increase in L in the form of a monetary fine
could be compensated by an equal
percentage reduction in p, leaving the expected
penalty pL unchanged, if agents
are risk neutral.
Faking degrees appears to be a fast growing and profitable business. Although fake
degrees and diploma mills are not recent, they are experiencing a considerable
expansion allowed by globalized markets and technological advances. We stressed
the considerable scale of this economic activity, its costs, benefits and net impacts.
Fake degrees share common features with other fakes, but also have particularities.
15 See for example the State of Michigan list of unacceptable degree suppliers http:// (accessed October 5, 2007).
16 Although Becker’s efforts to explain all things by way of isolated, rational, calculating
maximizing utility may seem to some extent not compatible with an institutionalist
approach, we
present this argument because it emphasizes how the legal system interferes with
economic choices
Defining fake degrees and related terms diploma mills, accreditation mills
constitutes a challenging but necessary step. Discussions about definitions are
unimportant quibbles over words and can change the way we think. A major
contribution of this paper is to emphasize that degrees, regardless of their
authenticity, serve instrumental and ceremonial purposes. By extending the
analysis to the issue of fake degrees, the authors have introduced a
new way to
consider diplomas as club goods delivering some exclusive rights
which are non-rival
to some extent. Among benefits delivered by such clubs, we
emphasize the status or positional considerations (in addition to more
conventional functions) that are likely
to play a strong role in the economics of
fake degrees. For policy, status does matter and has economic implications. If
status gets jobs, or goods redistributed toward those
with status, then purchasing
status via a fake degree will cause a reallocation of
resources. It may also cause
a waste of resources as obtaining a fake degree may be a
form of wasteful rent
seeking behavior. Welfare loss may also arise because having
fake degrees limits
the mobility of labor and transfer of skills since a local low quality
institution is not
clearly distinguishable from a fake degree in the international labor
People may end up delaying an education decision until after a move, or may
up not moving because their low end degree will not be distinguishable from a
fake degree outside of their local area of residence.
In sum, the authors have shown that fake degrees disturb the traditional
functions of diplomas and are likely to generate a significant increase in
transaction costs. As opposed to an exhaustive analysis, our contribution
constitutes a first step,
an appeal for further research on the application of
economic concepts and tools to
the analysis of degree markets either legitimate or
fake. More questions than answers
have been raised such as the analysis of
degrees with analytical tools of club theory,
the introduction of the status
function of degrees, the optimal level of protection against fake degrees, and the
effects of fake degrees on related markets. The liability
allocation among the
different parties (e.g., providers of fake degrees, users of fake
degrees) deserves
further attention.
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... The issue of "fake" credentials is a complex one, as the complexity starts with the issue of definition. As Grolleau, Lakhal, and Mzoughi (2008) recall, " [t]here are no definitive criteria to characterize a fake degree or a diploma mill and the lack of consensus on terms may generate some confusion". ...
... This example also illustrates why this article prefers to use the term credential rather than just diploma. Grolleau, Lakhal, and Mzoughi (2008) have a broader understanding of this term, stating that "[o]ur definition of fake degrees includes both replica testamurs from bona fide institutions and testamurs that can either be bought or earned with little work from an entity of some description". Literature on "fake" certificates usually do not consider fraudulently obtained "original" certificates (see below). ...
... Literature also seems to overlook the possibility of "full" fakes, i.e. a document mentioning a non-existing institution. Grolleau, Lakhal, and Mzoughi (2008) stated that quantification of this phenomenon is very scarce, and this situation has not evolved to date. However among practitioners the necessity to prevent and uncover cases of forgery is regarded as a high priority. ...
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You can access and download the full article at Elsevier’s web site : (no fee no registration). This article published in “Research in Globalization” (Elsevier) (2021) is an analysis of the potential and challenges for implementing a DLT-based solution to the procedures of recognition of educational credentials and certificates. Please disregard the document in the "Public Full-text" tab: this was an early manuscript hastily posted in my profile by some automatic algorithm. As the system does not allow me to delete this wrong document, I kindly ask you to only consider the accepted (published) open-access article that you can download on Elsevier's site. Many thanks and sorry for the inconvenience. This article discusses a case study of blockchain in government and the public sector that shows the challenges and benefits of blockchain in e-government and the possibility to make more efficient e-government by blockchain technology (DLT). In particular, the research touches on the issue of fake, fraudulent or forged academic degrees and professional titles, the issue of personal data protection in e-administration, the portability of data, the interoperability of systems. It focuses on mutual recognition of regulated occupations at the bilateral or international level. This article is cited in : * Alharbi, Mekhled; and Hussain, Farookh Khadeer (2021) Blockchain-Based Identity Management for Personal Data: A Survey. In: Barolli L. (eds) Advances on Broad-Band Wireless Computing, Communication and Applications. BWCCA 2021. Lecture Notes in Networks and Systems, vol 346. Springer, Cham. doi 10.1007/978-3-030-90072-4_17, <>.
... In the United States, evidence goes back to the Civil War, where the market of fraudulent certificates was a common practice, since 1730. However, recently, the issue is attracting more attention from education institutions, international organizations, and employers [1]. The number of students enrolled in tertiary education 155 worldwide has grown more than 53% between 2006 and 2018, according to data made available by the UNESCO Institute of Statistics. ...
... M <-metaTagExtraction(my_scopus, Field = "AU_CO", sep = ";") NetMatrix <-biblioNetwork(M, analysis = "collaboration", network = "countries", sep = ";") net=networkPlot(NetMatrix, n = dim(NetMatrix) [1], Title = "Country Collaboration", type = "circle", size=TRUE, remove.multiple=FALSE,labelsize=1.0) ...
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Due to added mobility and the increase in international students worldwide, as well as the current problem regarding the counterfeiting of diplomas and the selling of fraudulent certificates, we propose a technological solution. Namely, to ally blockchain technology to higher education certificates and diplomas, to make the process of checking for academic qualifications more facilitated and transparent. Employers of graduates, as well as higher education institutions which evaluate course applicants, would benefit. Perhaps equally as important, students applying for international degree programs would have their lives simplified. There is an increased pressure to ensure the legitimacy and authenticity of certifications and diplomas—and preferably without the current “hassle” of getting diplomas recognized by official entities. New technological advances, with the development of blockchain and smart contracts, with their characteristics of immutability, decentralization, security, traceability, and consensus, may be considered an excellent match to implement a robust and reliable anti-fraud solution to issue digital diplomas. Radical innovations, such as linking blockchain and higher education diplomas, involve significant change and novelty. Linking blockchain and higher education diplomas could potentially positively impact and benefit millions of people worldwide, especially the younger generations. This study involved a literature review and the searching of the Scopus database (refereed publications) for the following concepts: blockchain and diploma. Existing literature is recent, with most articles (25) published between 2019 and 2020, with 4 in 2018 and only 1 in 2017. This was aligned with our expectations since the development of blockchain utilization outside financial and crypto-assets industries is recent, and it is known as “Blockchain 3.0”. We can additionally affirm that the topic is attracting attention and efforts from researchers worldwide and that some higher education institutions have already implemented ad hoc solutions. As it is, the sector lacks a unified response to the problem of automatic and reliable higher education diploma certification.
... Few try to link corruption affecting a field of study to outcomes in that field. Grolleau et al. (2008) describe the economic effects of the shadow professoriate's production of fake degrees in theory, though without any kind of hard data. Authors like Mavisakalyan and Meinecke (2016) may link corrupt diplomas to employment in Armenia -but not to actual economic development. ...
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A shadow professoriate influences an increasing amount of development economics activity. Badly conceived hiring, pay, and promotion rules, as well as the money-seeking politics institutionalizing these rules, allow self-interested development economists to use its services and join its ranks. My essay uses tools from institutional economics to understand corruption and from the institutional corruption literature to assess the impacts of this shadow professorate on the economic development discipline. The literature points to a 7-part test useful for identifying such corrupt research. Easily over 30,000 pseudepigraphical ghostwriters, predatory journal editors and unqualified development workers each year pen articles which academics and development workers can rely on less and less-distorting the development economics discipline. They create new markets for paper mills in developing countries generating over $1 billion in wages each year, and oil career ladders for over 15,000 academics, government officials and development workers. They also divert at least $16 billion resources from formal academic and development institutions and agents resulting in damages easily exceeding $200 billion and probably more.
... Such extended mobility has increased the necessity of verification of academic and/or professional qualifications for potential applicants and current jobholders; particularly to detect and avoid fraud in critical employment positions, e.g., medical doctors (West & Barham, 2009). Credential fraud could evolve in an epidemic phenomenon (Grolleau, Lakhal, & Mzoughi, 2008) Blockchain technology can ideally address the aforementioned requirements of supporting international mobility, avoiding fraud in respect to acquired qualifications, and overcoming administrative barriers, since it is an open, distributed ledger that can record transactions of a community efficiently and in a verifiable and permanent way. In the higher education context, it can be assumed that: (a) an academic qualification is a public transaction between a HEI and an individual, (b) stakeholders or third parties need direct access to these transactions to ensure the accuracy of an applicant's qualifications, and (c) each transaction should not be modified once executed. ...
The global trend of credentialism as well as increased mobility in studies and work bring new requirements regarding the verification of academic qualifications. So far, traditional nostrification processes face challenges related to high process cycle times, elevated fees, and fraud incidents. In the higher education domain, blockchain-based approaches have emerged to revitalize the verification of academic qualifications, but they mostly rely on closed concepts offering their facility to a limited circle of entities. As a result, the verification of degrees is not publicly available to any third party. Moreover, in most cases, a concise process-aware approach describing the intended functionality with appropriate models is missing; this absence raises ambiguity and trust issues in the implemented application. This paper presents the design and early implementation of the VerDe (Verified Degrees) platform; a proposed blockchain-based application for registration and verification of academic qualifications. The novelty of the approach presented in this paper is the implementation of VerDe as a decentralized application utilizing Business Process Model & Notation (BPMN). This work demonstrates that usage of BPMN constructs provides an efficient method in addressing blockchain usability and complexity issues and facilitates the design and implementation of blockchain-based applications. The benefits of deploying VerDe in conjunction with BPMN are an efficient and transparent facility able to handle mobility consequences, detect fraud, and overcome administrative barriers by offering the verification capability to any third-party, and employing a custom-made token that emulates the European Credit Transfer and Accumulation System (ECTS).
... Numerous instances of document forgery and fake degrees have been reported. It is estimated that there are over 2,000,000 fake degree certificates in current circulation in the USA [4]. Further, there are about 300 unauthorized universities that are currently operating in the United States [5]. ...
Conference Paper
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Blockchain is a trending technology that is gaining popularity for its widespread application in various sectors, including education. Academic certificates are an important measure of an individual’s abilities. They are especially important for higher education and employment. However, advanced technologies have enabled the creation of fake documents. The paper counters this problem by proposing a blockchain-IPFS based solution. The proposed system is an Ethereum blockchain and IPFS based system for storing, retrieving, and authenticating educational documents as well as streamlining the entire process of examination and result generation. The proposed system comprises three main modules: Admission; Examination and Results; Third-Party Module. The authenticity of any document is guaranteed since it is shared within a secured environment. Existing research on similar solutions suffers from poor testing, lack of evaluation, and inefficient storage models. The proposed system overcomes these drawbacks. The proposed system was also evaluated for uploading and fetching latency. The average results show that the system has a mean execution time of 10176 milliseconds for uploading a 1.45MB document and a mean execution time of 110.7 milliseconds for fetching 6 documents each of size 214 kB. Thus, the system is found to be efficient in addition to being safe and secure.
... Similar problems are noted in higher education systems globally. According to UNESCO 30% of senior managers work with fake qualifications globally [6]. In addition, the process is lengthy and inconvenient as graduates must contact the university to obtain replacement education documents in case of loss, with these shortcomings, companies face daunting tasks to verify documents. ...
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Blockchain is a reliable and innovative technology that harnesses education and training through digital technologies. Nonetheless, it has been still an issue keeping track of student/graduate academic achievement and blockchain access rights management. Detailed information about academic performance within a certain period (semester) is not present in the official education documents. Furthermore, academic achievement documents issued by institutions are not secured against unauthorized changes due to the involvement of intermediaries. Therefore, verification of official educational documents has become a pressing issue owing to the recent development of digital technologies. However, effective tools to accelerate the verification are rare as the process takes time. This study provides a prototype of the UniverCert platform based on a consortium version of the decentralized, open-source Ethereum blockchain technology. The proposed platform is based on a globally distributed peer-to-peer network that allows educational institutions to partner with the blockchain network, track student data, verify academic performance, and share documents with other stakeholders. The UniverCert platform was developed on a consortium blockchain architecture to address the problems universities face in storing and securing student data. The system provides a solution to facilitate students’ registration, verification, and authenticity of educational documents.
... This paper's scope is a specific component source of reputational risk for institutions, i.e., the threat from counterfeit and fake certificates and inefficient verification process. The key sources of such risk include misconduct internal to the institution or of external actors: (1) External event -Fake certificate obtained from a diploma mill [16] [17]. for key academic record including enrolments to provide a validity to the fake degree and diplomas [17][19]. ...
... Problems we face today with academic degrees are backed by corruption, system flaws, ability to effortlessly falsify and distribute these degrees in large quantities are impractical ways to validate them if needed to do so [1][2][3]. Certificates which are issued in a traditional/physical way can be easily copied and their integrity and origin is hard to impossible to verify. Other issues are related to the way these certificates are issued, delays due to administrative level incompatibilities or miscommunication, credential transfers among faculties/universities. ...
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In this paper we propose to use a blockchain based system, called BCert, which is used to store, distribute and verify academic certificates in order to improve efficiency and security. BCert is based on utilizing Ethereum smart contracts and leverages the benefits of IPFS (InterPlanetary File System), to store the certificates in a decentralized file system. Smart contracts provide a secure distributed and shared decentralized ledger of all assets and transactions. A cryptographic hash function shall be applied on document and result may be stored on a public blockchain in a transaction signed by private key of issuer institution which ensures the validity of documents. We intend to provide confidentiality to the data by encrypting them with AES encryption algorithm, before creating transaction. Keywords: blockchain, certificates, smart contracts, solidity, AES, IPFS
We humans deal with a vast number of documents in our day-to-day activities. The varying list of documents we deal with in our daily life include land registration, vehicle registration, marriage registration, health prescriptions and voter ID. For example, a person’s capabilities and achievements are generally showcased in terms of his educational, professional and extracurricular certificates. In today’s computer era, we humans are trying to make our life easy by developing mechanisms to preserve and manage these certificates in terms of softcopies. Maintenance of Soft copy of all these certificates has become the primary motto and the hardcopy maintenance has become obsolete. These certificates help us to showcase our personal abilities and career growth. There is a possibility of these certificates being forged or being lost. So utmost importance is given to secure these certificates against losing or to make them tamper proof. Numerous methods exist to preserve these certificates as well as to thwart forgery. Conventional method of storing revolves around a centralized certificate storage system which is vulnerable to data breach. Many Blockchain based frameworks and implementations are proposed. We will discuss various certificate management approaches based on blockchain, their drawbacks and propose a new and effective framework.
Social status is a social reward that affects the incentive structure facing individuals. If status is provided to educated people, more people will obtain an education. The choice of occupation is affected by the social status associated with different occupations, establishing a link between social status, the equilibrium wage structure and the allocation of workers among occupations. When status is not directly observed, people try to signal it by changing their consumption choices or behaviour. The narrow paradigm of homo economicus should be extended to include social status among the basic motivations for economic decisions.
A review of the literature suggests the issue of differentiating between virtual degree/ diploma mills and legitimate virtual universities is a growing problem and does not appear to be abating. Although the United States of America has suffered this problem for many years, Australia is now feeling the presence of unaccredited, virtual universities and individuals using the degrees they confer for employment purposes. In order to put the study in perspective, a policy analysis model was developed outlining the goal of higher education in Australia, the problems it is currently facing and the range of solutions in order to remedy the identified problems. Of particular importance is the problem section which analysed three cases studies; St Clements University, the University of Asia and Greenwich University. The aim of this chapter was to determine if these universities fell into the category of 'degree mills'. Results suggest that although the University of Asia and St Clements University met over half of the randomly chosen criteria, Greenwich University met only one of the qualities. Notwithstanding this, the writer has surmised that although the task was an interesting attempt to categorise the three universities under review, the results were flawed since the criteria were too broad, vague and did not provide sufficient evidence to determine if the universities fell under the degree mill category. The writer subsequently analysed the three case studies against the new National Protocols for Higher Education (the proposed solution section of the model) due to be written into State and Territory legislation by June 30th 2001. Results from this analysis found that both the University of Asia and St Clements University would be required to undergo a full institutional audit if they chose to continue operations in Australia. Results for Greenwich University suggest that the process establishing the university was fundamentally unsound. An effort to ascertain the exact process that occurred was fruitless due to conflicting claims from both the Commonwealth Government and Greenwich University. Nonetheless, the establishment of Greenwich University on Norfolk Island has spawned a new process for university establishment and recognition in Australia. With the establishment of various global virtual university alliances and the steep increase in degree mill activity on the Internet, the writer has found the new policy initiatives by the present Government to protect Australia's higher education sector are a solid step in the right direction. However the need for proactive monitoring of virtual university activity on the Internet and online information resources for prospective students have been identified. This is to ensure policy initiatives are effectively implemented, monitored and refined so that they remain current with the rapid technological change the Australian higher education sector finds itself operating within.
Ronald Coase wrote two great theoretical articles that earned him the Nobel Prize: "The Nature of the Firm" in 1937 and "The Problem of Social Cost" in 1960. He also wrote many articles dealing with the methodology of economics, often in the setting of a discussion of a particular economist, such as Adam Smith or Alfred Marshall. The methodological articles will be my particular focus here.
This paper relates quality and uncertainty. The existence of goods of many grades poses interesting and important problems for the theory of markets. On the one hand, the interaction of quality differences and uncertainty may explain important institutions of the labor market. On the other hand, this paper presents a struggling attempt to give structure to the statement: “Business in under-developed countries is difficult”; in particular, a structure is given for determining the economic costs of dishonesty. Additional applications of the theory include comments on the structure of money markets, on the notion of “insurability,” on the liquidity of durables, and on brand-name goods.
In the last twenty five years, economists have devoted considerable research effort to the study of crime and punishment. This article examines the contribution made by economists in two particular areas. First, the economic analysis of participation in criminal activity. Second, the design of “efficient” punishments for convicted criminals. The economic approach to crime and punishment assumes that criminals are rational individuals, who respond to incentives. Empirical analysis, undertaken by economists, tends to confirm this view. Several consequences follow from this, especially in relation to the structure of punishments for (related) crimes. In particular punishments need to be designed so that criminals choose less, rather than more, harmful acts.
This paper provides an analysis into the global phenomenon known as credential/qualification fraud, a $US 1 billion dollar ‘cottage’ industry which has tainted higher education in Australia, and does not appear to be abating. The study is developed through a conceptual framework of credentialism, degree creep and screening theory, which the author theorises spawns the demand for degree qualifications, both legitimate and ‘less‐than‐wonderful’ along continuums of legitimacy and acceptability. The paper suggests several key resources and tools that can be used by administrators of universities, non‐self accrediting higher education providers and industry human resource managers. The paper concludes by reviewing key‐global practices currently employed as proactive measures to minimise credential fraud, moving towards a best practice framework for Australia.