Budget Uncertainty and Faculty Contracts: A Dynamic Framework for Comparative Analysis
AbstractWe study hiring decisions made by competing universities in a dynamic framework, focusing on the structure of university finance. Universities with annual state-approved financing underinvest in high-quality faculty, while universities that receive a significant part of their annual income from returns on endowments hire fewer but better faculty and provide long-term contracts. If university financing is linked to the number of students, there is additional pressure to hire low-quality short-term staff. An increase in the university's budget might force the university to switch its priorities from `research' to `teaching' in equilibrium. We employ our model to discuss the necessity for state-financed endowments, and investigate the political economics of competition between universities, path-dependence in the development of the university system, and higher-education reform in emerging market economies.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6744.
Date of creation: Mar 2008
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Other versions of this item:
- K. Sonin & I. Khovanskaya & M. Yudkevich., 2008. "Budget Uncertainty and Faculty Contracts: A Dynamic Framework for Comparative Analysis," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 12.
- Irina Khovanskaya & Konstantin Sonin & Maria Yudkevich, 2007. "Budget Uncertainty and Faculty Contracts: A Dynamic Framework for Comparative Analysis," Working Papers w0112, Center for Economic and Financial Research (CEFIR).
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- I20 - Health, Education, and Welfare - - Education - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-12 (All new papers)
- NEP-EDU-2008-04-12 (Education)
- NEP-GTH-2008-04-12 (Game Theory)
- NEP-SOG-2008-04-12 (Sociology of Economics)
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