From 1994 to 2007, she was a faculty member of Harvard University, first as an assistant professor, then as Morris Kahn Associate Professor of Economics, and starting in 2001 as the Allie S. Freed Professor of Economics. She was the university's only African-American economics professor with tenure. In 2005, she was appointed to be one of the 24 Harvard College Professors. In 2006, she won the Phi Beta Kappa Teaching Prize. She moved to Stanford University in 2007, where she is the Scott and Donya Bommer Professor of Economics. She was named the John and Lydia Pearce Mitchell University Fellow in Undergraduate Education in 2014.
She has been married to Blair Hoxby, also a Harvard graduate and a Rhodes Scholar, since 1993. He is currently a faculty member in the English department at Stanford University and does scholarly work on John Milton and Renaissance theater.
She was recently accused of a physical confrontation whereby Hoxby allegedly attempted to cut the speaker cords with wire cutters and physically assaulting a student at an on-campus fraternity party at Stanford University. Assistant Santa Clara County District Attorney Brian Welch said his office would not file charges agains Hoxby, citing conflicting accounts of events and a lack of serious injuries in making the decision. 
Hoxby's research focuses on higher education policy, including college choice, the effects of financial aid, the outcomes of graduates from different colleges, college tuition policy, public school finance, school choice, the effect of education on economic growth and income inequality, teacher pay and teacher quality, peer effects, and class size. She also works on topics that fit under the headings of public finance (property taxes, government finance), labor economics (earnings, returns to skills), and quantitative methods.
Hoxby is a Principal Investigator of the Expanding College Opportunities project, a randomized controlled trial that had dramatic effects on low-income, high achievers' college-going. For work related to this project, she recently received The Smithsonian Institution's Ingenuity Award. Her research in this area began with a demonstration that low-income high achievers usually fail to apply to any selective college. This is despite the fact that they are extremely likely to be admitted and receive such generous financial aid that they usually pay much less to attend selective colleges than they do to attend non-selective schools. This issue is now being addressed systematically owing to the project's evidence that individualized but inexpensive informational interventions cause students to take fuller advantage of their opportunities.
In some of her other best known work on higher education, she explains the rising cost of college. She analyzes how the market for higher education works and has developed since WWII. And she evaluates why some universities are much more productive than others. Recently, she has analyzed universities' endowment policiesand the economics of online higher education. Her current research includes studies of colleges' value-added and how federal spending and tax policies affect college-going.
One of Hoxby's most-cited papers, "Does Competition among Public Schools Benefit Students and Taxpayers?" (American Economic Review, 2000), argues that increased school choice improves educational outcomes for all students by improving school quality. Jesse Rothstein (at the time, a graduate student at the University of California at Berkeley under Professor David Card) published a paper in which he stated that he was unable to independently replicate her results. Hoxby later published a response in defense of her original work, and the debate received coverage in the mainstream press.
Caroline M. Hoxby (editor). 2003. The Economics of School Choice. University of Chicago Press. ISBN 9780226355337.
Caroline M. Hoxby (editor). 2004. College Choices: The Economics of Where to Go, When to Go, and How to Pay for It. University of Chicago Press. ISBN 9780226355351.
Jeffrey R. Brown and Caroline M. Hoxby (editors). 2015. How the Financial Crisis and Great Recession Affected Higher Education. University of Chicago Press. ISBN 9780226201832. ISBN 9780226201979.