Advanced Search
MyIDEAS: Login to save this paper or follow this series

Efficient Tuition & Fees, Examinations and Subsidies

Contents:

Author Info

  • Gary-Bobo, Robert J.
  • Trannoy, Alain

Abstract

A student's future log-wage is given by the sum of a skill premium and a random personal ‘ability’ term. Students observe only a private, noisy signal of their ability, and universities can condition admission decisions on the results of noisy tests. We assume first that universities are maximizing social surplus, and contrast the results with those obtained when they maximize rents. If capital markets are perfect, and if test results are public knowledge, then, there is no sorting on the basis of test scores. Students optimally self-select as a result of pricing only. In the absence of externalities generated by an individual's higher education, the optimal tuition is then greater than the university's marginal cost. If capital markets are perfect but asymmetries of information are bilateral, i.e., if universities observe a private signal of each student's ability, or if there are borrowing constraints, then, the optimal policy involves a mix of pricing and pre-entry selection based on the university's private information. Optimal tuition can then be set below marginal cost, and can even become negative, if the precision of the university's private assessment of students' abilities is high enough.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cepr.org/pubs/dps/DP5011.asp
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5011.

as in new window
Length:
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:cpr:ceprdp:5011

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: examinations; higher education; incomplete information; state subsidies; tuition fees;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Fernandez, Raquel & Gali, Jordi, 1999. "To Each According to . . . ? Markets, Tournaments, and the Matching Problem with Borrowing Constraints," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(4), pages 799-824, October.
  2. Costrell, Robert M, 1994. "A Simple Model of Educational Standards," American Economic Review, American Economic Association, vol. 84(4), pages 956-71, September.
  3. DEL REY, Elena, 2000. "Teaching versus research: a model of state university competition," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2000030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Green, Jerry & Sheshinski, Eytan, 1975. "A Note on the Progressivity of Optimal Public Expenditures," Scholarly Articles 3203641, Harvard University Department of Economics.
  5. Bruce Sacerdote, 2001. "Peer Effects With Random Assignment: Results For Dartmouth Roommates," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(2), pages 681-704, May.
  6. Gordon C. Winston, 1999. "Subsidies, Hierarchy and Peers: The Awkward Economics of Higher Education," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 13-36, Winter.
  7. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(2), pages 533-575, May.
  8. Borooah, Vani K, 1994. " Modelling Institutional Behaviour: A Microeconomic Analysis of University Management," Public Choice, Springer, Springer, vol. 81(1-2), pages 101-24, October.
  9. Charles F. Manski, 1993. "Adolescent Econometricians: How Do Youth Infer the Returns to Schooling?," NBER Chapters, in: Studies of Supply and Demand in Higher Education, pages 43-60 National Bureau of Economic Research, Inc.
  10. Creedy, John & Francois, Patrick, 1990. "Financing higher education and majority voting," Journal of Public Economics, Elsevier, vol. 43(2), pages 181-200, November.
  11. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(1), pages 1-40, February.
  12. Betts, Julian R, 1998. "The Impact of Educational Standards on the Level and Distribution of Earnings," American Economic Review, American Economic Association, vol. 88(1), pages 266-75, March.
  13. De Fraja, Gianni & Iossa, Elisabetta, 2002. "Competition among Universities and the Emergence of the Elite Institution," Bulletin of Economic Research, Wiley Blackwell, vol. 54(3), pages 275-93, July.
  14. Joshua D. Angrist & Kevin Lang, 2002. "How Important are Classroom Peer Effects? Evidence from Boston's Metco Program," Upjohn Working Papers and Journal Articles 02-85, W.E. Upjohn Institute for Employment Research.
  15. Chapman, Bruce, 1997. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(442), pages 738-51, May.
  16. Roland Benabou, 1991. "Workings of a City: Location, Education, and Production," NBER Technical Working Papers 0113, National Bureau of Economic Research, Inc.
  17. Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 43(17), pages 127-37, May.
  18. Zimmerman, David J., 1999. "Peer Effects in Academic Outcomes: Evidence From a Natural Experiment," Williams Project on the Economics of Higher Education, Department of Economics, Williams College DP-52, Department of Economics, Williams College.
  19. 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.
  20. Arnott, Richard & Rowse, John, 1987. "Peer group effects and educational attainment," Journal of Public Economics, Elsevier, vol. 32(3), pages 287-305, April.
  21. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(3), pages 573-86, June.
  22. Victor Lavy, 2002. "Evaluating the Effect of Teachers' Group Performance Incentives on Pupil Achievement," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(6), pages 1286-1317, December.
  23. Julian R. Betts & Darlene Morell, 1999. "The Determinants of Undergraduate Grade Point Average: The Relative Importance of Family Background, High School Resources, and Peer Group Effects," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 268-293.
  24. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 2(3), pages 303-18, July.
  25. Caroline Hoxby, 2000. "Peer Effects in the Classroom: Learning from Gender and Race Variation," NBER Working Papers 7867, National Bureau of Economic Research, Inc.
  26. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
  27. Andrew Weiss, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-154, Fall.
  28. Barr, Nicholas, 1993. "Alternative Funding Resources for Higher Education," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 103(418), pages 718-28, May.
  29. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gianni De Fraja & Paola Valbonesi, 2009. "The Design of the University System," Discussion Papers in Economics 09/19, Department of Economics, University of Leicester.
  2. Alexander Kemnitz, 2007. "University Funding Reform, Competition, and Teaching Quality," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 163(2), pages 356-378, June.
  3. del Rey, Elena & Romero, Laura, 2004. "Prices versus Exams as Strategic Instruments for Competing Universities," Working Papers of the Department of Economics, University of Girona, Department of Economics, University of Girona 12, Department of Economics, University of Girona.
  4. Beath, John & Poyago-Theotoky, Joanna & Ulph, David, 2011. "University funding systems: impact on research and teaching," Economics Discussion Papers 2011-1, Kiel Institute for the World Economy.
  5. McKenzie, Tom & Sliwka, Dirk, 2010. "Universities as Stakeholders in their Students' Careers: On the Benefits of Graduate Taxes to Finance Higher Education," IZA Discussion Papers 5330, Institute for the Study of Labor (IZA).
  6. Hugo Harari-Kermadec & David Flacher, 2011. "Tuition fees, self-esteem and social heterogeneity," Post-Print hal-00566151, HAL.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5011. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.