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Equal Opportunities in Education: Market Equilibrium and Public Policy

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  • De Fraja, Gianni

Abstract

This paper investigates whether individual decisions lead to equality of opportunity in education, defined in the specific sense of irrelevance of parental income for university attendance. We show that, even if households can borrow in the capital market, the laissez-faire equilibrium exhibits an income bias, in the sense that individuals from high income households are more likely to attend university. We then study the welfare maximising policy of a utilitarian government. Its features are opposite to the free market equilibrium: with plausible assumptions, at low income levels, the tuition fee should be designed in such a way so as to create a bias in favour of low income households.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2090.

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Date of creation: Feb 1999
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Handle: RePEc:cpr:ceprdp:2090

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Keywords: Education; student loans; University;

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References

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  1. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-18, July.
  2. Arrow, Kenneth J, 1971. "A Utilitarian Approach to the Concept of Equality in Public Expenditure," The Quarterly Journal of Economics, MIT Press, vol. 85(3), pages 409-15, August.
  3. von Weizsäcker, Robert K & Wigger, Berthold, 1998. "Risk, Resources and Education," CEPR Discussion Papers 1808, C.E.P.R. Discussion Papers.
  4. Chapman, Bruce, 1997. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," Economic Journal, Royal Economic Society, vol. 107(442), pages 738-51, May.
  5. P. Hare & D. Ulph, 1981. "Imperfect capital markets and the public provision of education," Public Choice, Springer, vol. 36(3), pages 481-507, January.
  6. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  7. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  8. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  9. Barr, Nicholas, 1993. "Alternative Funding Resources for Higher Education," Economic Journal, Royal Economic Society, vol. 103(418), pages 718-28, May.
  10. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465.
  11. Nicholas Barr, 1997. "Student loans : towards a new public/private mix," LSE Research Online Documents on Economics 282, London School of Economics and Political Science, LSE Library.
  12. Lommerud, K.E., 1988. "Educational Subsidies When Relative Income Matters," Papers 05-88, Norwegian School of Economics and Business Administration-.
  13. Nicholas Barr, 1993. "Alternative funding resources for higher education," LSE Research Online Documents on Economics 280, London School of Economics and Political Science, LSE Library.
  14. Lazear, Edward, 1977. "Academic Achievement and Job Performance: Note," American Economic Review, American Economic Association, vol. 67(2), pages 252-54, March.
  15. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
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Cited by:
  1. Giorgio Brunello & Massimo Giannini, 2001. "Stratified or Comprehensive? The Economic Efficiency of School Design," CESifo Working Paper Series 453, CESifo Group Munich.

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