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Financing Higher Education and Labor Mobility

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  • 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
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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. Matthias Parey & Fabian Waldinger, 2007. "Studying Abroad and the Effect on International Labor Market Mobility: Evidence from the Introduction of Erasmus," CEE Discussion Papers, Centre for the Economics of Education, LSE 0086, Centre for the Economics of Education, LSE.
  2. Thum, Claudio & Uebelmesser, Silke, 2003. "Mobility and the Role of Education as a Commitment Device," International Tax and Public Finance, Springer, Springer, vol. 10(5), pages 549-64, September.
  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), CEPREMAP 0806, CEPREMAP.
  4. 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.
  5. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer, Springer, vol. 28(2), pages 203-218, June.
  6. Kemnitz, Alexander, 2007. "Educational Federalism and the Quality Effects of Tuition Fees," Dresden Discussion Paper Series in Economics, Dresden University of Technology, Faculty of Business and Economics, Department of Economics 08/07, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  7. Creedy, John & Francois, Patrick, 1990. "Financing higher education and majority voting," Journal of Public Economics, Elsevier, Elsevier, vol. 43(2), pages 181-200, November.
  8. Poutvaara, Panu, 2004. "Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?," Munich Reprints in Economics, University of Munich, Department of Economics 19296, University of Munich, Department of Economics.
  9. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, 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, Elsevier, vol. 6(1), pages 12-36, February.
  11. 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.
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Cited by:
  1. Gabrielle Demange, 2008. "The Provision of Higher Education in a Global World—Analysis and Policy Implications," CESifo Economic Studies, CESifo, CESifo, vol. 54(2), pages 248-276, June.
  2. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2012. "Financing Higher Education in a Mobile World," CESifo Working Paper Series 3849, CESifo Group Munich.
  3. Tim Krieger & Thomas Lange, 2008. "Education policy and tax competition with imperfect student and labor mobility," Working Papers CIE 8, University of Paderborn, CIE Center for International Economics.
  4. Matthieu Delpierre & Bertrand Verheyden, 2011. "Student and Worker Mobility under University and Government Competition," CESifo Working Paper Series 3415, CESifo Group Munich.
  5. Haupt, Alexander, 2012. "The evolution of public spending on higher education in a democracy," European Journal of Political Economy, Elsevier, Elsevier, vol. 28(4), pages 557-573.
  6. Scalera, Domenico, 2009. "Skilled migration and education policies: Is there still scope for a Bhagwati tax?," MPRA Paper 19643, University Library of Munich, Germany.
  7. repec:hal:wpaper:halshs-00564912 is not listed on IDEAS

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