We study voting over higher education finance in an economy with risk averse households who are heterogeneous in income. We compare four different systems and analyse voters' choices among them: a traditional subsidy scheme, a pure loan scheme, income contingent loans and graduate taxes. Using numerical simulations, we find that majorities for income contingent loans or graduate taxes become more likely as the income distribution gets more equal. We also perform sensitivity analyses with respect to risk aversion and the elasticity of substitution between high skilled and low skilled workers.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 2829.
Find related papers by JEL classification: D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education