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Nearly-efficient tuitions and subsidies in American public higher education

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  • Burer, Samuel
  • Fethke, Gary

Abstract

A two-stage setting for determining subsidies and tuitions in a public university context is developed where fixed costs introduce an efficiency-enhancing role for taxpayer-financed appropriations. The optimal subsidy per enrollment is shown to be proportional to students’ maximum net willingness to pay. This result extends a well-known result associated with Ramsey pricing to include endogenous appropriations to public higher education. Realistic restrictions are imposed on the subsidy structure, and scenarios for determining tuitions are addressed and illustrated numerically, using budget data for the University of Iowa and the University of Michigan.

Suggested Citation

  • Burer, Samuel & Fethke, Gary, 2016. "Nearly-efficient tuitions and subsidies in American public higher education," Economics of Education Review, Elsevier, vol. 55(C), pages 182-197.
    • Handle: RePEc:eee:ecoedu:v:55:y:2016:i:c:p:182-197
    DOI: 10.1016/j.econedurev.2016.09.003
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    References listed on IDEAS

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    Cited by:

    1. Gary Fethke, 2017. "Efficiency And Equity Implications Of Charging Nonresidents Full-Cost Tuitions," Contemporary Economic Policy, Western Economic Association International, vol. 35(4), pages 603-614, October.
    2. Fethke, Gary, 2021. "Efficient enrollments using high tuition-high aid," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 543-557.

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    More about this item

    Keywords

    Higher education finance; Resident and nonresident tuitions; Subsidies; Welfare transfers;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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