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Student and Worker Mobility under University and Government Competition

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  • Matthieu Delpierre
  • Bertrand Verheyden

Abstract

We provide a normative analysis of endogenous student and worker mobility in the presence of diverging interests between universities and governments. Student mobility generates a university competition effect which induces them to overinvest in education, whereas worker mobility generates a free-rider effect for governments, who are not willing to subsidize the education of agents who will work abroad. At equilibrium, the free-rider effect always dominates the competition effect, resulting in underinvestment in human capital and overinvestment in research. This inefficiency can be corrected if a transnational transfer for mobile students is implemented. With endogenous income taxation, we show that the strength of fiscal competition increases with human capital production. Consequently, supranational policies aimed at promoting teaching quality reduce tax revenues at the expense of research.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-04/cesifo1_wp3415.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3415.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3415

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Keywords: student mobility; worker mobility; university competition; government competition;

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References

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  1. Justman, Moshe & Thisse, Jacques-Francois, 1997. "Implications of the mobility of skilled labor for local public funding of higher education," Economics Letters, Elsevier, Elsevier, vol. 55(3), pages 409-412, September.
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  5. JUSTMAN , Moshe & THISSE, Jacques-François, . "Local public funding of higher education when skilled labor is imperfectly mobile," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1460, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  7. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer, Springer, vol. 17(6), pages 587-606, December.
  8. Elena del Rey, 2003. "Competition among universities: The role of preferences for research and government finance," Hacienda Pública Española, IEF, IEF, vol. 164(1), pages 75-80, march.
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  11. Rey, Elena Del, 2001. "Teaching versus Research: A Model of State University Competition," Journal of Urban Economics, Elsevier, vol. 49(2), pages 356-373, March.
  12. Poutvaara, Panu, 2008. "Public and private education in an integrated Europe: Studying to migrate and teaching to stay?," Munich Reprints in Economics, University of Munich, Department of Economics 19802, University of Munich, Department of Economics.
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  14. 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.
  15. 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.
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  20. 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.
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  22. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2008. "Financing Higher Education and Labor Mobility," CESifo Working Paper Series 2362, CESifo Group Munich.
  23. Dennis Epple & Richard Romano & Holger Sieg, 2006. "Admission, Tuition, and Financial Aid Policies in the Market for Higher Education," Econometrica, Econometric Society, Econometric Society, vol. 74(4), pages 885-928, 07.
  24. De Fraja, Gianni & Iossa, Elisabetta, 2002. "Competition among Universities and the Emergence of the Elite Institution," Bulletin of Economic Research, Wiley Blackwell, Wiley Blackwell, vol. 54(3), pages 275-93, July.
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  26. Thomas Lange, 2009. "Public Funding of Higher Education when Students and Skilled Workers are Mobile," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 65(2), pages 178-199, June.
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