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The Design of the University System

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  • De Fraja, Gianni
  • Valbonesi, Paola

Abstract

This paper compares the organisation of the university sector under private provision with the structure which would be chosen by a welfare maximising government. It studies a general equilibrium model where universities carry out research and teach students. To attend university, and earn higher incomes in the labour market, students pay a tuition fee, and each university chooses its tuition fee to maximise the amount of resources it can devote to research. Research bestows an externality on society because it increases labour market earnings. Government intervention needs to balance labour market efficiency considerations -- which would tend to equalise the number of students attending each university -- with considerations of efficiency on the production side, which suggest that the most productive universities should teach more students and carry out more research. We find that government concentrates research more than the private market would, but less than it would like to do if it had perfect information about the productivity of universities. It also allows fewer universities than would operate in a private system.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7038.

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Date of creation: Nov 2008
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Handle: RePEc:cpr:ceprdp:7038

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Keywords: higher education; university sector;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Facciamo i conti
    by Alberto Bagnai in Goofynomics on 2014-02-25 00:03:00
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Cited by:
  1. Cremer, Helmuth & Maldonado, Dario, 2013. "Mixed Oligopoly in Education," IZA Discussion Papers 7264, Institute for the Study of Labor (IZA).
  2. T Agasisti & G Johnes, 2009. "Cost Structure, Efficiency and Heterogeneity in US Higher Education: An Empirical Analysis," Working Papers 599308, Lancaster University Management School, Economics Department.
  3. De Fraja, Gianni & Valbonesi, Paola, 2012. "The design of the university system," Journal of Public Economics, Elsevier, vol. 96(3), pages 317-330.
  4. Manna, Ester, 2013. "Mixed Duopoly with Motivated Teachers," MPRA Paper 52041, University Library of Munich, Germany.
  5. Lisa Grazzini & Annalisa Luporini & Alessandro Petretto, 2010. "Competition between State Universities," Working Papers - Economics wp2010_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  6. De Fraja, Gianni, 2011. "A Theoretical Analysis of Public Funding for Research," CEPR Discussion Papers 8442, C.E.P.R. Discussion Papers.
  7. Dennis Epple & Richard Romano & Sinan Sarpça & Holger Sieg, 2013. "The U.S. Market for Higher Education: A General Equilibrium Analysis of State and Private Colleges and Public Funding Policies," NBER Working Papers 19298, National Bureau of Economic Research, Inc.

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