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Higher education funding: The value of information

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  • Hatsor, Limor

Abstract

This note examines the key role of information about individual skills in economic welfare. In the model, agents invest in higher education when the returns to their investment are uncertain. They choose how to finance their investment on the basis of a public signal about their individual skills. This note provides an example of an economic framework in which, in equilibrium, more information about individual skills (more accurate signals) makes economic agents worse off.

Suggested Citation

  • Hatsor, Limor, 2015. "Higher education funding: The value of information," Economics Letters, Elsevier, vol. 137(C), pages 230-233.
    • Handle: RePEc:eee:ecolet:v:137:y:2015:i:c:p:230-233
    DOI: 10.1016/j.econlet.2015.10.031
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    References listed on IDEAS

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    1. 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.
    2. Hatsor, Limor, 2014. "Efficient Funding of Higher Education," Foerder Institute for Economic Research Working Papers 275827, Tel-Aviv University > Foerder Institute for Economic Research.
    3. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-574, September.
    4. Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 2, chapter 25, pages 1435-1503, Elsevier.
    5. 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.
    6. Bernhard Eckwert & Itzhak Zilcha, 2004. "Economic implications of better information in a dynamic framework," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(3), pages 561-581, October.
    7. Green, Jerry R, 1981. "Value of Information with Sequential Futures Markets," Econometrica, Econometric Society, vol. 49(2), pages 335-358, March.
    8. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    9. Edward E. Schlee, 2001. "The Value of Information in Efficient Risk-Sharing Arrangements," American Economic Review, American Economic Association, vol. 91(3), pages 509-524, June.
    10. Talia Bar & Vrinda Kadiyali & Asaf Zussman, 2009. "Grade Information and Grade Inflation: The Cornell Experiment," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 93-108, Summer.
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    Cited by:

    1. Limor Hatsor & Itzhak Zilcha, 2021. "Subsidizing heterogeneous higher education systems," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(2), pages 318-344, April.

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    More about this item

    Keywords

    Education finance; Higher education; Human capital; Information; Risk sharing; Adverse selection;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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