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Financing Higher Education in a Mobile World

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  • Gabrielle Demange
  • Robert Fenge
  • Silke Uebelmesser

Abstract

This paper analyzes how integrated labor markets affect the financing of higher education. For this, we employ a general-equilibrium model with overlapping generations and individuals who differ in their abilities. At the first stage, governments can choose the quality of education and the financing system. At the second stage, individuals make their education and migration decisions given the governmental framework for higher education and the mobility assumptions.In a closed economy and in the presence of imperfect credit markets, a mix of tax- and fee-financing is optimal. In integrated labor markets, countries have an incentive to attract skilled workers and to free-ride on education provided by other countries. When only skilled workers are mobile, there is a sub-optimal shift from taxes to fees and the number of students is too low. When also students can migrate, there is a countervailing force such that maintaining the optimal financial mix becomes possible.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3849.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3849

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Related research

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

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References

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  1. 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.
  2. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2008. "Financing Higher Education and Labor Mobility," CESifo Working Paper Series 2362, CESifo Group Munich.
  3. Lydia Mechtenberg & Roland Strausz, 2008. "The Bologna process: how student mobility affects multi-cultural skills and educational quality," International Tax and Public Finance, Springer, Springer, vol. 15(2), pages 109-130, April.
  4. Fredrik Andersson & Kai A. Konrad, 2002. "Human Capital Investment and Globalization in Extortionary States," CESifo Working Paper Series 703, CESifo Group Munich.
  5. 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.
  6. Alexander Kemnitz, 2010. "Educational Federalism and the Quality Effects of Tuition Fees," CESifo Working Paper Series 3193, CESifo Group Munich.
  7. David E. Wildasin, 2000. "Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 73-95, March.
  8. Mansoorian, Arman & Myers, Gordon M., 1997. "On the consequences of government objectives for economies with mobile populations," Journal of Public Economics, Elsevier, Elsevier, vol. 63(2), pages 265-281, January.
  9. Matthias Parey & Fabian Waldinger, 2011. "Studying Abroad and the Effect on International Labour Market Mobility: Evidence from the Introduction of ERASMUS," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 121(551), pages 194-222, March.
  10. JUSTMAN, Moshe & THISSE, Jacques-Francois, 1997. "Local public funding of higher education when skilled labor is mobile," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1997024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. 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.
  12. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, Elsevier, vol. 6(1), pages 12-36, February.
  13. Jacobs, Bas & van der Ploeg, Frederick, 2005. "Guide to Reform of Higher Education: A European Perspective," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5327, C.E.P.R. Discussion Papers.
  14. Panu Poutvaara, 2003. "Educating Europe," Public Economics, EconWPA 0302008, EconWPA.
  15. Paolo Mauro & Antonio Spilimbergo, 1998. "How Do the Skilled and the Unskilled Respond to Regional Shocks? the Case of Spain," IMF Working Papers 98/77, International Monetary Fund.
  16. Dreher, Axel & Poutvaara, Panu, 2011. "Foreign students and migration to the United States," Munich Reprints in Economics, University of Munich, Department of Economics 20044, University of Munich, Department of Economics.
  17. Panu Poutvaara, 2008. "Public and Private Education in an Integrated Europe: Studying to Migrate and Teaching to Stay?," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 110(3), pages 591-608, 09.
  18. 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.
  19. von Weizsäcker, Robert K & Wigger, Berthold, 1998. "Risk, Resources and Education," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1808, C.E.P.R. Discussion Papers.
  20. 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.
  21. Alexander Haupt & Eckhard Janeba, 2004. "Education, Redistribution, and the Threat of Brain Drain," NBER Working Papers 10618, National Bureau of Economic Research, Inc.
  22. Justman, M. & Thisse, J.-F., . "Implications of the mobility of skilled labor for local public funding of higher education," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1296, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  23. Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, MIT Press, vol. 4(5), pages 1014-1037, 09.
  24. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer, Springer, vol. 28(2), pages 203-218, June.
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Citations

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Cited by:
  1. Marcel GERARD & Silke UEBELMESSER, 2014. "Financing Higher Education when Students and Graduates are Internationally Mobile," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2014010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Rainald Borck & Silke Uebelmesser & Martin Wimbersky, 2012. "The Political Economics of Higher Education Finance for Mobile Individuals," CESifo Working Paper Series 3877, CESifo Group Munich.
  3. Lewis Evans & Neil Quigley, 2013. "Intergenerational Contracts and Time Consistency: Implications for Policy Settings and Governance in the Social Welfare System," Treasury Working Paper Series 13/25, New Zealand Treasury.
  4. Marcel Gérard & Silke Uebelmesser, 2013. "Globalization and Access to Higher Education – Policy Implications," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 11(2), pages 03-10, 07.
  5. Maria Racionero & Elena Del Rey, 2012. "Choosing the type of income-contingent loan: risk-sharing versus risk-pooling," CEPR Discussion Papers, Centre for Economic Policy Research, Research School of Economics, Australian National University 671, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  6. Haupt, Alexander & Krieger, Tim & Lange, Thomas, 2013. "Education policy, student migration, and brain gain," Discussion Paper Series 2013-05, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.

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