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Financing Higher Education and Labor Mobility

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Author Info

  • Gabrielle Demange
  • Robert Fenge
  • Silke Uebelmesser

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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2008/wp-cesifo-2008-07/cesifo1_wp2362.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2362.

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

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Related research

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

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References

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  1. Parey, Matthias & Waldinger, Fabian, 2008. "Studying Abroad and the Effect on International Labor Market Mobility: Evidence from the Introduction of ERASMUS," IZA Discussion Papers 3430, Institute for the Study of Labor (IZA).
  2. Creedy, John & Francois, Patrick, 1990. "Financing higher education and majority voting," Journal of Public Economics, Elsevier, vol. 43(2), pages 181-200, November.
  3. Lydia Mechtenberg & Roland Strausz, 2006. "The Bologna Process: How Student Mobility Affects Multi-Cultural Skills and Educational Quality," SFB 649 Discussion Papers SFB649DP2006-018, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  4. Claudio Thum & Silke Uebelmesser, 2001. "Mobility and the Role of Education as a Commitment Device," CESifo Working Paper Series 450, CESifo Group Munich.
  5. Demange, Gabrielle & Fenge, Robert & Uebelmesser, Silke, 2008. "The Provision of Higher Education in a Global World - Analysis and Policy Implications," CEPREMAP Working Papers (Docweb) 0806, CEPREMAP.
  6. Kemnitz, Alexander, 2005. "Educational Federalism and the Quality Effects of Tuition Fees," Discussion Papers 617, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
  7. 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.
  8. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer, vol. 28(2), pages 203-218, June.
  9. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-18, July.
  10. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
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Citations

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Cited by:
  1. Haupt, Alexander, 2012. "The evolution of public spending on higher education in a democracy," European Journal of Political Economy, Elsevier, vol. 28(4), pages 557-573.
  2. Matthieu Delpierre & Bertrand Verheyden, 2011. "Student and Worker Mobility under University and Government Competition," CESifo Working Paper Series 3415, CESifo Group Munich.
  3. Demange, Gabrielle & Fenge, Robert & Uebelmesser, Silke, 2008. "The Provision of Higher Education in a Global World - Analysis and Policy Implications," CEPREMAP Working Papers (Docweb) 0806, CEPREMAP.
  4. Domenico Scalera, 2012. "Skilled Migration And Education Policies: Is There Still Scope For A Bhagwati Tax?," Manchester School, University of Manchester, vol. 80(4), pages 447-467, 07.
  5. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer, vol. 17(6), pages 587-606, December.
  6. Gabrielle Demange & Robert Fenge, 2010. "Competition in the quality of higher education: the impact of students' mobility," Working Papers halshs-00564912, HAL.
  7. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2012. "Financing Higher Education in a Mobile World," CESifo Working Paper Series 3849, CESifo Group Munich.

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