Voting on income-contingent loans for higher education
AbstractWe consider risk-averse individuals who differ in two characteristics - ability to benefit from education and inherited wealth - and analyze higher education participation under two alternative financing schemes - tax subsidy and (risk-sharing) income-contingent loans. With decreasing absolute risk aversion, wealthier individuals are more likely to undertake higher education despite the fact that, according to the stylized financing schemes we consider, individuals do not pay any up-front financial cost of education. We then determine which financing scheme arises when individuals are allowed to vote between schemes. We show that the degree of risk aversion plays a crucial role in determining which financing scheme obtains a majority, and that the composition of the support group for each financing scheme can be of two different types.
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Bibliographic InfoPaper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2011-549.
Length: 26 Pages
Date of creation: Jul 2011
Date of revision:
Other versions of this item:
- Elena Del Rey & María Racionero, 2012. "Voting On Income‐Contingent Loans For Higher Education," The Economic Record, The Economic Society of Australia, vol. 88(s1), pages 38-50, 06.
- H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
- I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-09 (All new papers)
- NEP-EDU-2011-08-09 (Education)
- NEP-LAB-2011-08-09 (Labour Economics)
- NEP-POL-2011-08-09 (Positive Political Economics)
- NEP-UPT-2011-08-09 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Del Rey, Elena & Racionero, María, 2010.
"Financing schemes for higher education,"
European Journal of Political Economy,
Elsevier, vol. 26(1), pages 104-113, March.
- Bruce Chapman, 2005.
"Income Contingent Loans for Higher Education: International Reform,"
CEPR Discussion Papers
491, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, Elsevier.
- Garcia-Penalosa, Cecilia & Walde, Klaus, 2000. "Efficiency and Equity Effects of Subsidies to Higher Education," Oxford Economic Papers, Oxford University Press, vol. 52(4), pages 702-22, October.
- Dan Anderberg & Alessandro Balestrino, 2008. "The Political Economy of Post-Compulsory Education Policy with Endogenous Credit Constraints," CESifo Working Paper Series 2304, CESifo Group Munich.
- Jordi Jofre-Monseny & Martin Wimbersky, 2010.
"Political economics of higher education finance,"
2010/17, Institut d'Economia de Barcelona (IEB).
- De Fraja, Gianni, 2001. "Education Policies: Equity, Efficiency and Voting Equilibrium," Economic Journal, Royal Economic Society, vol. 111(471), pages C104-19, May.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Are income-contingent loans for higher education feasible?
by Economic Logician in Economic Logic on 2011-09-01 14:21:00
- Maria Racionero & Elena Del Rey, 2012. "Choosing the type of income-contingent loan: risk-sharing versus risk-pooling," CEPR Discussion Papers 671, Centre for Economic Policy Research, Research School of Economics, Australian National University.
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