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Reducing Product Diversity in Higher Education

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  • Kelchtermans, Stijn
  • Verboven, Frank

Abstract

Public systems of higher education have recently attempted to cut costs by providing financial incentives to institutions who reduce the diversity of their programs. We study the profit and welfare effects of reducing product diversity in higher education, against the background of a funding system reform in Flanders (Belgium). We find that dropping duplicated programs at individual institutions tends to be socially undesirable, due to the limited fixed cost and variable cost savings and the students' low willingness to travel to other institutions. Furthermore, we find that the financial incentives offered to drop programs may be very ineffective, leading to both undesirable reform and undesirable status quo. These findings emphasize the complexities in regulating product diversity in higher education, and serve as a word of caution towards the various decentralized financial incentive schemes that have recently been introduced.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6508.

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Date of creation: Oct 2007
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Handle: RePEc:cpr:ceprdp:6508

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Keywords: higher education; product diversity;

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Cited by:
  1. Demange, Gabrielle & Fenge, Robert & Uebelmesser, Silke, 2008. "The Provision of Higher Education in a Global World - Analysis and Policy Implications," CEPREMAP Working Papers (Docweb) 0806, CEPREMAP.

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