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Private Investment in Higher Education: Comparing Alternative Funding Schemes

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  • Bernhard Eckwert
  • Itzhak Zilcha

Abstract

This paper uses an overlapping generations framework to analyze the implications of different financing regimes in the education sector for human capital formation and economic welfare. Agents privately invest in education after they have received a noisy information signal about their abilities. The incentives of the individuals to invest in education are determined by the financing regime under which the economy operates. The paper analyzes and compares three financing regimes. Under each regime, the payback obligation of an educational loan is contingent, to some extent, on an individual’s future income.

Suggested Citation

  • Bernhard Eckwert & Itzhak Zilcha, 2008. "Private Investment in Higher Education: Comparing Alternative Funding Schemes," CESifo Working Paper Series 2395, CESifo.
    • Handle: RePEc:ces:ceswps:_2395
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    References listed on IDEAS

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    Cited by:

    1. Kemptner, Daniel & Tolan, Songül, 2018. "The role of time preferences in educational decision making," Economics of Education Review, Elsevier, vol. 67(C), pages 25-39.
    2. Lance Lochner & Alexander Monge-Naranjo, 2014. "Student Loans and Repayment: Theory, Evidence and Policy," Working Papers 2014-40, Federal Reserve Bank of St. Louis.
    3. Mishra, Neelesh Kumar & Chakraborty, Abhishek & Singh, Sanjeet & Ranjan, Prabhat, 2023. "Efficiency analysis of engineering colleges in India: Decomposition into parallel sub-processes systems," Socio-Economic Planning Sciences, Elsevier, vol. 89(C).
    4. Viaene, Jean-Marie & Zilcha, Itzhak, 2013. "Public funding of higher education," Journal of Public Economics, Elsevier, vol. 108(C), pages 78-89.
    5. Bernhard Eckwert & Itzhak Zilcha, 2017. "Student loans: When is risk sharing desirable?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(2), pages 217-231, June.
    6. Bernhard Eckwert & Itzhak Zilcha, 2014. "Higher Education: Subsidizing Tuition versus Subsidizing Student Loans," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(6), pages 835-853, December.
    7. Arbel, Yuval & Bar-El, Ronen & Tobol, Yossef, 2017. "Equal Opportunity through Higher Education: Theory and Evidence on Privilege and Ability," IZA Discussion Papers 10564, Institute of Labor Economics (IZA).
    8. Ben Heijdra & Fabian Kindermann & Laurie Reijnders, 2017. "Life in shakles? The quantitative implications of reforming the educational financing system," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 37-57, April.
    9. Hatsor, Limor, 2015. "Higher education funding: The value of information," Economics Letters, Elsevier, vol. 137(C), pages 230-233.
    10. Balmaceda, Felipe, 2021. "A failure of the market for college education and on-the-job human capital," Economics of Education Review, Elsevier, vol. 84(C).
    11. Aldieri, Luigi & Kotsemir, Maxim & Vinci, Concetto Paolo, 2018. "The impact of research collaboration on academic performance: An empirical analysis for some European countries," Socio-Economic Planning Sciences, Elsevier, vol. 62(C), pages 13-30.

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    More about this item

    Keywords

    higher education; funding regimes; human capital; welfare;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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