IDEAS home Printed from https://ideas.repec.org/a/bla/econom/v79y2012i313p76-96.html
   My bibliography  Save this article

Private Investment in Higher Education: Comparing Alternative Funding Schemes

Author

Listed:
  • BERNHARD ECKWERT
  • ITZHAK ZILCHA

Abstract

This paper uses an overlapping generations framework to analyze the implications of different financing regimes in the education sector for human capital formation and economic welfare. Agents privately invest in education after they have received a noisy information signal about their abilities. The incentives of the individuals to invest in education are determined by the financing regime under which the economy operates. The paper analyzes and compares three financing regimes. Under each regime, the payback obligation of an educational loan is contingent, to some extent, on an individual’s future income.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bernhard Eckwert & Itzhak Zilcha, 2012. "Private Investment in Higher Education: Comparing Alternative Funding Schemes," Economica, London School of Economics and Political Science, vol. 79(313), pages 76-96, January.
    • Handle: RePEc:bla:econom:v:79:y:2012:i:313:p:76-96
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
    2. Bassanini, Andrea & Scarpetta, Stefano, 2002. "Does human capital matter for growth in OECD countries? A pooled mean-group approach," Economics Letters, Elsevier, vol. 74(3), pages 399-405, February.
    3. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, December.
    4. Diego Restuccia & Carlos Urrutia, 2004. "Intergenerational Persistence of Earnings: The Role of Early and College Education," American Economic Review, American Economic Association, vol. 94(5), pages 1354-1378, December.
    5. Nicholas Barr & Iain Crawford, 1998. "Funding Higher Education in an Age of Expansion," Education Economics, Taylor & Francis Journals, vol. 6(1), pages 45-70.
    6. Chapman, Bruce, 1997. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," Economic Journal, Royal Economic Society, vol. 107(442), pages 738-751, May.
    7. Susan M. Dynarski, 2003. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," American Economic Review, American Economic Association, vol. 93(1), pages 279-288, March.
    8. Orazem, Peter & Tesfatsion, Leigh, 1997. "Macrodynamic Implications of Income-Transfer Policies for Human Capital Investment and School Effort," Journal of Economic Growth, Springer, vol. 2(3), pages 305-329, September.
    9. Viaene, Jean-Marie & Zilcha, Itzhak, 2002. "Capital markets integration, growth and income distribution," European Economic Review, Elsevier, vol. 46(2), pages 301-327, February.
    10. Caucutt, Elizabeth M. & Kumar, Krishna B., 2003. "Higher education subsidies and heterogeneity: a dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 27(8), pages 1459-1502, June.
    11. Checchi,Daniele, 2008. "The Economics of Education," Cambridge Books, Cambridge University Press, number 9780521066464.
    12. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    13. Woodhall, Maureen, 1988. "Designing a student loan programme for a developing country: the relevance of international experience," Economics of Education Review, Elsevier, vol. 7(1), pages 153-161, February.
    14. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 501-526.
    15. Park, Kang H., 1996. "Educational expansion and educational inequality on income distribution," Economics of Education Review, Elsevier, vol. 15(1), pages 51-58, February.
    16. Lleras,Miguel Palacios, 2004. "Investing in Human Capital," Cambridge Books, Cambridge University Press, number 9780521828406.
    17. David Greenaway & Michelle Haynes, 2003. "Funding Higher Education in The UK: The Role of Fees and Loans," Economic Journal, Royal Economic Society, vol. 113(485), pages 150-166, February.
    18. Feldman, Mark & Gilles, Christian, 1985. "An expository note on individual risk without aggregate uncertainty," Journal of Economic Theory, Elsevier, vol. 35(1), pages 26-32, February.
    19. Albrecht, Douglas & Ziderman, Adrian, 1993. "Student Loans: An Effective Instrument for Cost Recovery in Higher Education?," The World Bank Research Observer, World Bank, vol. 8(1), pages 71-90, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kemptner, Daniel & Tolan, Songül, 2018. "The role of time preferences in educational decision making," Economics of Education Review, Elsevier, vol. 67(C), pages 25-39.
    2. Lance Lochner & Alexander Monge-Naranjo, 2014. "Student Loans and Repayment: Theory, Evidence and Policy," Working Papers 2014-40, Federal Reserve Bank of St. Louis.
    3. Mishra, Neelesh Kumar & Chakraborty, Abhishek & Singh, Sanjeet & Ranjan, Prabhat, 2023. "Efficiency analysis of engineering colleges in India: Decomposition into parallel sub-processes systems," Socio-Economic Planning Sciences, Elsevier, vol. 89(C).
    4. Viaene, Jean-Marie & Zilcha, Itzhak, 2013. "Public funding of higher education," Journal of Public Economics, Elsevier, vol. 108(C), pages 78-89.
    5. Bernhard Eckwert & Itzhak Zilcha, 2017. "Student loans: When is risk sharing desirable?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(2), pages 217-231, June.
    6. Bernhard Eckwert & Itzhak Zilcha, 2014. "Higher Education: Subsidizing Tuition versus Subsidizing Student Loans," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(6), pages 835-853, December.
    7. Arbel, Yuval & Bar-El, Ronen & Tobol, Yossef, 2017. "Equal Opportunity through Higher Education: Theory and Evidence on Privilege and Ability," IZA Discussion Papers 10564, Institute of Labor Economics (IZA).
    8. Ben Heijdra & Fabian Kindermann & Laurie Reijnders, 2017. "Life in shakles? The quantitative implications of reforming the educational financing system," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 37-57, April.
    9. Hatsor, Limor, 2015. "Higher education funding: The value of information," Economics Letters, Elsevier, vol. 137(C), pages 230-233.
    10. Balmaceda, Felipe, 2021. "A failure of the market for college education and on-the-job human capital," Economics of Education Review, Elsevier, vol. 84(C).
    11. Aldieri, Luigi & Kotsemir, Maxim & Vinci, Concetto Paolo, 2018. "The impact of research collaboration on academic performance: An empirical analysis for some European countries," Socio-Economic Planning Sciences, Elsevier, vol. 62(C), pages 13-30.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arbel, Yuval & Bar-El, Ronen & Tobol, Yossef, 2017. "Equal Opportunity through Higher Education: Theory and Evidence on Privilege and Ability," IZA Discussion Papers 10564, Institute of Labor Economics (IZA).
    2. Eckwert, Bernhard & Zilcha, Itzhak, 2010. "Improvement in information and private investment in education," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 585-597, April.
    3. Bernhard Eckwert & Itzhak Zilcha, 2014. "Higher Education: Subsidizing Tuition versus Subsidizing Student Loans," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(6), pages 835-853, December.
    4. Bernhard Eckwert & Itzhak Zilcha, 2007. "The Effect of Better Information on Income Inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 287-307, August.
    5. Jean‐Marie Viaene & Itzhak Zilcha, 2009. "Human Capital and Inequality Dynamics: The Role of Education Technology," Economica, London School of Economics and Political Science, vol. 76(304), pages 760-778, October.
    6. Bernhard Eckwert & Itzhak Zilcha, 2017. "Student loans: When is risk sharing desirable?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(2), pages 217-231, June.
    7. Elizabeth M. Caucutt & Lance Lochner, 2020. "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," Journal of Political Economy, University of Chicago Press, vol. 128(3), pages 1065-1147.
    8. Viaene, J.-M. & Zilcha, I., 2001. "Human Capital Formation, Income Inequality and Growth," Papers 2001-13, Tel Aviv.
    9. Eckhard Janeba & Alexander Kemnitz & Nick Ehrhart, 2007. "Studiengebühren in Deutschland: Drei Thesen und ihr empirischer Gehalt," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(2), pages 184-205, March.
    10. Bernhard Eckwert & Itzhak Zilcha, 2011. "Competition in Funding Higher Education," CESifo Working Paper Series 3588, CESifo.
    11. David Greenaway & Michelle Haynes, 2003. "Funding Higher Education in The UK: The Role of Fees and Loans," Economic Journal, Royal Economic Society, vol. 113(485), pages 150-166, February.
    12. Thakurata, Indrajit & D'Souza, Errol, 2018. "Child labour and human capital in developing countries - A multi-period stochastic model," Economic Modelling, Elsevier, vol. 69(C), pages 67-81.
    13. Elizabeth M. Caucutt & Krishna B. Kumar, 2004. "Evaluating Explanations for Stagnation," Development and Comp Systems 0409002, University Library of Munich, Germany.
    14. Booij, Adam S. & Leuven, Edwin & Oosterbeek, Hessel, 2012. "The role of information in the take-up of student loans," Economics of Education Review, Elsevier, vol. 31(1), pages 33-44.
    15. Andros Kourtellos, 2002. "Modeling Parameter Heterogeneity in Cross Country Growth Regression Models," University of Cyprus Working Papers in Economics 0212, University of Cyprus Department of Economics.
    16. Viaene, Jean-Marie & Zilcha, Itzhak, 2002. "Public education under capital mobility," Journal of Economic Dynamics and Control, Elsevier, vol. 26(12), pages 2005-2036, October.
    17. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," UFAE and IAE Working Papers 562.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    18. C.Mónica Capra & Tomomi Tanaka & ColinF. Camerer & Lauren Feiler & Veronica Sovero & CharlesN. Noussair, 2009. "The Impact of Simple Institutions in Experimental Economies with Poverty Traps," Economic Journal, Royal Economic Society, vol. 119(539), pages 977-1009, July.
    19. Hellier, Joël, 2017. "Stratified higher education,social mobility at the top and efficiency: The case of the French ‘Grandes écoles’," MPRA Paper 76724, University Library of Munich, Germany.
    20. Lorraine Dearden & Emla Fitzsimons & Gill Wyness, 2011. "The Impact of Tuition Fees and Support on University Participation in the UK," CEE Discussion Papers 0126, Centre for the Economics of Education, LSE.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:econom:v:79:y:2012:i:313:p:76-96. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.