Competition among universities: The role of preferences for research and government finance

We build on previous results to explore the effect of student mobility on university behaviour. Our results suggest that, if universities do not care for research, they do not react to increased competition when students are able to choose where to study. Further, neither do they react to the incentives provided by the government through the financing scheme. Preferences for research thus turn out to be the key element for success of policies which aim at (i) enhancing competition in the higher education sector and (ii) affecting resulting levels of education quality and research through incentives provided by the financing scheme. Classification-JEL : L3, I22.university competition, higher education finance.

Competition between public and private universities: quality, prices and exams

The rapid growth of private higher education in response to high demand is a recent phenomenon in most European countries. This paper provides a theoretical model of the higher education market in which a public and a private university compete for students in the presence of borrowing constraints. We find that there exists a unique equilibrium in which the public institution is of higher quality than the private institution. This result supports the observation across many European countries that public universities have usually higher quality and admission standards than their private competitors

Voting on income-contingent loans for higher education

We consider risk-averse individuals who differ in two characteristics - ability to benefit from education and inherited wealth - and analyze higher education participation under two alternative financing schemes - tax subsidy and (risk-sharing) income-contingent loans. With decreasing absolute risk aversion, wealthier individuals are more likely to undertake higher education despite the fact that, according to the stylized financing schemes we consider, individuals do not pay any up-front financial cost of education. We then determine which financing scheme arises when individuals are allowed to vote between schemes. We show that the degree of risk aversion plays a crucial role in determining which financing scheme obtains a majority, and that the composition of the support group for each financing scheme can be of two different types.

An efficiency argument for affirmative action in higher education

We consider a dynamic framework in which generations are linked by educational background. In particular, individuals differ in ability to benefit from education, parental education and appurtenance to a group (either a disadvantaged minority or a non-minority). The individual decision to undertake education is inefficient because people fail to account for the fact that their getting education increases the chances that their children will also gain access to education. This intergenerational externality is higher for people from the disadvantaged minority, provided that the difference in expected utility for children of uneducated and educated individuals is larger within this group. This provides an argument for affirmative action in higher education, in the form of larger subsidies to individuals from the minority group, which is exclusively based on efficiency considerations.Affirmative action, intergenerational externality.

An efficiency argument for affirmative action in higher education

In a dynamic framework in which generations are linked by educational background, we identify an intergenerational externality that is larger for disadvantaged groups. This provides an argument for affirmative action in higher education based on efficiency alone.

Optimal educational choice and redistribution when cultural background matters

Higher education plays an important role in determining lifetime earnings. In turn, the decision to become educated depends to a large extent on family characteristics, such as wealth and cultural background. In this paper, we focus on the interaction between fiscal policies and educational choices when cultural background matters. We derive optimality conditions for a linear income tax and a lump-sum subsidy for education in a dynamic framework in which generations are linked by cultural background. The factors that determine their sign and magnitude include concerns for redistribution, efficiency, and the educational externality on future generationsOptimal linear income tax, Subsidies, Higher education, Educational background

Conditional Cash Transfers and Education Quality in the Presence of Credit Constraints

We investigate the relative merits of unconditional cash transfers (UCT), conditional cash transfers (CCT), and improvements in education quality on efficiency and welfare. In our setting some parents under-invest in their children's education because capital market imperfections prevent them from borrowing. When credit constrained households can be perfectly targeted by the government, we show that CCT are more effective than UCT in enhancing efficiency and equivalent in terms of welfare. When public education quality is very low, raising quality is welfare improving, but is never efficiency enhancing. If the government cannot target constrained households, UCT may be the best policy both in terms of efficiency and welfare.conditional cash transfers, public education, education quality, unconditional cash transfers, credit constraint, efficiency, welfare

Financing schemes for higher education

Most industrial countries have traditionally subsidized the provision of higher education. Several alternative financing schemes, which rely on larger contributions from students, are being increasingly adopted. Schemes such as income contingent loans, like the Australian Higher Education Contribution Scheme (HECS), provide insurance against uncertain educational outcomes. This paper analyses alternative financing schemes for higher education, with particular emphasis on the insurance role and its effect on higher education participation.

COMPETITION BETWEEN PUBLIC AND PRIVATE UNIVERSITIES: QUALITY, PRICES AND EXAMS

The rapid growth of private higher education in response to high demand is a recent phenomenon in most European countries. This paper provides a theoretical model of the higher education market in which a public and a private university compete for students in the presence of borrowing constraints. We find that there exists a unique equilibrium in which the public institution is of higher quality than the private institution. This result supports the observation across many European countries that public universities have usually higher quality and admission standards than their private competitors.

Prices versus Exams as Strategic Instruments for Competing Universities

In this paper we investigate the optimal choice of prices and/or exams by universities in the presence of credit constraints. We first compare the optimal behavior of a public, welfare maximizing, monopoly and a private, profit maximizing, monopoly. Then we model competition between a public and a private institution and investigate the new role of exams/prices in this environment. We find that, under certain circumstances, the public university may have an interest to rise tuition fees from minimum levels if it cares for global welfare. This will be the case provided that (i) the private institution has higher quality and uses only prices to select applicants, or (ii) the private institution has lower quality and uses also exams to select students. When this is the case, there are efficiency grounds for raising public prices.Analysis of Education