Reducing Product Diversity in Higher Education
AbstractPublic 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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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6508.
Date of creation: Oct 2007
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Other versions of this item:
- Kelchtermans, Stijn & Verboven, Frank, 2007. "Reducing product diversity in higher education," Working Papers 2007/14, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
- Stijn Kelchtermans & Frank Verboven, 2007. "Reducing product diversity in higher education," Center for Economic Studies - Discussion papers ces0726, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- I2 - Health, Education, and Welfare - - Education
- I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-13 (All new papers)
- NEP-EDU-2007-10-13 (Education)
- NEP-HRM-2007-10-13 (Human Capital & Human Resource Management)
- NEP-SOG-2007-10-13 (Sociology of Economics)
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