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Financing Higher Education and Labor Mobility

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Author Info
Gabrielle Demange ()
Robert Fenge ()
Silke Uebelmesser ()

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Abstract

This paper analyzes how mobility of post-graduate skilled workers and students across different countries affects the quality level of higher education and the way education is financed. We start by examining a closed economy. In the presence of imperfect credit markets the education level with pure fee-financing is lower than the optimal level. If the credit market imperfections are not too large, a mix of tax- and fee-financing is optimal. The reason for this is that with pure fee-financing too few individuals decide to study. With mobility of skilled workers, both countries have an incentive to attract foreign skilled mobile workers as tax-payers while - at least partially - free-riding on the other country’s provision of education. Both countries thus increase the tuition fee above the optimum and change the level of education correspondingly. If countries maintain the financing mix foreign skilled workers are attracted by suboptimal levels of educational quality. Allowing also for mobile students may intensify the upward race of fees. The case of free-riding on the education provided by other countries may be strengthened. However, countries may anticipate this race and abstain from engaging in fee competition in the first place.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2362.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2362

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Related research
Keywords: higher education; labor migration; tuition fees; taxes;

Find related papers by JEL classification:
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
I22 - Health, Education, and Welfare - - Education - - - Educational Finance

References listed on IDEAS
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  1. Creedy, John & Francois, Patrick, 1990. "Financing higher education and majority voting," Journal of Public Economics, Elsevier, vol. 43(2), pages 181-200, November. [Downloadable!] (restricted)
  2. Claudio Thum & Silke Uebelmesser, 2003. "Mobility and the Role of Education as a Commitment Device," Asia-Pacific Financial Markets, Springer, vol. 10(5), pages 549-564, September. [Downloadable!] (restricted)
    Other versions:
  3. 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.
  4. Alexander Kemnitz, . "Educational Federalism and the Quality Effects of Tuition Fees," IVS discussion paper series 617, Institut für Volkswirtschaft und Statistik (IVS), University of Mannheim. [Downloadable!]
  5. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-18, July. [Downloadable!] (restricted)
  6. Gabrielle Demange, 2008. "The Provision of Higher Education in a Global World—Analysis and Policy Implications," CESifo Economic Studies, Oxford University Press, vol. 54(2), pages 248-276, June. [Downloadable!] (restricted)
  7. Panu Poutvaara, 2003. "Educating Europe," Public Economics 0302008, EconWPA. [Downloadable!]
    Other versions:
  8. Lydia Mechtenberg & Roland Strausz, 2008. "The Bologna process: how student mobility affects multi-cultural skills and educational quality," International Tax and Public Finance, Springer, vol. 15(2), pages 109-130, April. [Downloadable!] (restricted)
    Other versions:
  9. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer, vol. 28(2), pages 203-218, June. [Downloadable!] (restricted)
  10. von Weizsäcker, Robert K & Wigger, Berthold, 1998. "Risk, Resources and Education," CEPR Discussion Papers 1808, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February. [Downloadable!] (restricted)
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