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Public Finance of Private Goods: The Case of College Education

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  • Garratt, Rod
  • Marshall, John M

Abstract

This paper describes a contract theory of public finance of college education that explains why everyone pays for the college education of a lucky minority. The contract provides gambles that families desire. Optimizing the contract determines the taxes paid by all members of society, fees paid by those whose children go to college, the fraction of children who are admitted to college, and the quality of college education. Changes in wealth lead to changes in taxes and admissions but fees and quality are invariant. Using a cutoff level of precollege achievement to determine admission to college is justified by the theory. Copyright 1994 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 102 (1994)
Issue (Month): 3 (June)
Pages: 566-82

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Handle: RePEc:ucp:jpolec:v:102:y:1994:i:3:p:566-82

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Web page: http://www.journals.uchicago.edu/JPE/

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Cited by:
  1. Kuzey Yilmaz, 2014. "On the Importance of Fertility Behavior in School Finance Policy Design," Koç University-TUSIAD Economic Research Forum Working Papers 1403, Koc University-TUSIAD Economic Research Forum.
  2. Eric Hanushek & Charles Ka Yui Leung & Kuzey Yilmaz, 2014. "Borrowing Constraints, College Aid, and Intergenerational Mobility," RCER Working Papers 581, University of Rochester - Center for Economic Research (RCER).
  3. Peter Norman & Hanming Fang, 2010. "Toward an Efficiency Rationale for the Public Provision of Private Goods," 2010 Meeting Papers 1185, Society for Economic Dynamics.
  4. Harry Holzer & David Neumark, 1999. "Assessing Affirmative Action," NBER Working Papers 7323, National Bureau of Economic Research, Inc.
  5. Viaene, Jean-Marie & Zilcha, Itzhak, 2013. "Public funding of higher education," Journal of Public Economics, Elsevier, vol. 108(C), pages 78-89.
  6. Carmen Bevia & I?go Iturbe-Ormaetxe, . "Redistribution and Subsidies for Higher Education," UFAE and IAE Working Papers 475.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  7. Michael A. Sadler, 2000. "Escaping Poverty: Risk-Taking and Endogenous Inequality in a Model of Equilibrium Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 704-725, October.
  8. Freeman, Scott, 1996. "Equilibrium Income Inequality among Identical Agents," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1047-64, October.
  9. Ho, Lok Sang, 1997. "Institutional foundations for a just society," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 26(6), pages 627-643.
  10. Thomas Gall, 2008. "Lotteries, inequality, and market imperfection: Galor and Zeira go gambling," Economic Theory, Springer, vol. 34(2), pages 359-382, February.

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