The Evolution of Public Spending on Higher Education in a Democracy

This paper analyses political forces that cause an initial expansion of public spending on higher education and an ensuing decline in subsidies. Growing public expenditures increase the future size of the higher income class and thus boost future demand for education. This demand shift implies that the initial subsidy per student becomes too expensive to be politically sustainable. Despite a voters’ backlash that curbs education subsidies, overall enrolments continue to rise. But the participation rate of the children of lower income families, that went up in the expansion period, declines over time, both in absolute terms and relative to the rate of their counterparts from higher income households.higher education, voting, social stratification, social mobility, overlapping generations

An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition

A firm that faces insufficient supply of labor can either increase the wage offer to attract more applicants, or reduce the hiring standard to enlarge the pool of potential employees, or do both. This simultaneous adjustment of wages and hiring standards has been emphasized in a classical contribution by Reder (1955) and implies that wage reactions to employment changes can be expected to be more pronounced for low wage workers than for high wage workers. We test this hypothesis (together with a related hypothesis on firm-specific human capital) by applying a bootstrap-based quantile regression approach to censored panel data from the German employment register. Our findings suggest that market clearing is achieved by a combination of wage and hiring standards adjustment

An Empirical Test of the Reder Hypothesis

A firm that faces insufficient supply of labor can either increase the wage offer to attract more applicants, or reduce the hiring standard to enlarge the pool of potential employees, or do both. This simultaneous adjustment of wages and hiring standards in response to changes in market conditions has been emphasized in a classical contribution by Reder and leads to the effect that wage reactions to employment changes can be expected to be more pronounced for low wage workers than for high wage workers. This is the `Reder Hypothesis'. The present contribution sets out to test this hypothesis using German employment register data and a censored panel quantile regression approach. Our findings support the Reder Hypothesis, suggesting that market clearing in labor markets is achieved by a combination of wage adjustments and changes in hiring standards