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Scholarships or Student Loans? Subsidizing Higher Education in the Presence of Moral Hazard

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  • ALESSANDRO CIGNO
  • ANNALISA LUPORINI

Abstract

An income-contingent loan scheme can at best replicate the allocation brought about by a scholarship scheme financed by a graduate tax, and only on condition that there is nothing to stop the policy maker from using tuition fees as if they were taxes. If that is not possible, even the best loan scheme will exclude some well-qualified school leaver from university. Even if individual study effort is observable, but more so if it is not, it is not socially desirable that all students should specialize in the subjects that promise the highest graduate earnings. Copyright � 2009 Wiley Periodicals, Inc..

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9779.2008.01397.x
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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 11 (2009)
Issue (Month): 1 (02)
Pages: 55-87

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Handle: RePEc:bla:jpbect:v:11:y:2009:i:1:p:55-87

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References

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  1. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Tranfers to families with children as a principal-agent problem," CHILD Working Papers wp02_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  2. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  3. Salvatore Barbaro, 2002. "The Distributional Impact of Subsidies to Higher Education - Empirical Evidence from Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(4), pages 458-, December.
  4. Barbaro, Salvatore, 2002. "The distributional impact of subsidies to higher education: empirical evidence from Germany," FiBS-Forum 11, Forschungsinstitut für Bildungs- und Sozialökonomie (FiBS).
  5. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Salvatore Barbaro, 2002. "The Distributional Impact of Subsidies to Higher Education - Empirical Evidence from Germany," Departmental Discussion Papers 114, University of Goettingen, Department of Economics.
  7. Sinclair-Desgagne, Bernard, 1994. "The First-Order Approach to Multi-signal Principal-Agent Problems," Econometrica, Econometric Society, vol. 62(2), pages 459-66, March.
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Citations

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Cited by:
  1. DEL REY, Elena & RACIONERO, Maria, . "Financing schemes for higher education," CORE Discussion Papers RP -2181, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Joan Rosselló, 2007. "Does a public university system avoid the stratification of public universities and the segregation of students?," DEA Working Papers 26, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  3. repec:lan:wpaper:2436 is not listed on IDEAS
  4. Alessandro Cigno & Annalisa Luporini, 2009. "Optimal family policy in the presence of moral hazard, when the quantity and quality of children are stochastic," CHILD Working Papers wp13_09, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  5. Alessandro Cigno & Annalisa Luporini, 2013. "Student Loans and the Allocation of Graduate Jobs," Working Paper Series 38_13, The Rimini Centre for Economic Analysis.
  6. repec:lan:wpaper:2516 is not listed on IDEAS
  7. repec:lan:wpaper:2660 is not listed on IDEAS
  8. repec:lan:wpaper:2434 is not listed on IDEAS

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