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Regulation of program supply in higher education. Lessons from a funding system reform

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  • Kelchtermans, Stijn

    ()
    (Hogeschool-Universiteit Brussel (HUB), Belgium
    Katholieke Universiteit Leuven, Belgium)

  • Verboven, Frank

    ()
    (Katholieke Universiteit Leuven, Belgium
    C.E.P.R., London)

Abstract

It has become well documented that the performance gap between European and US universities is at least partly due to lower spending on higher education in Europe. Rather than raising the public budget or promoting private contributions, many governments have attempted to make public spending more efficient in various ways. This paper reports on results from a proposed funding system reform in Flanders (Belgium), which aimed to save costs by reducing the diversity and duplication of study programs. We draw the following lessons. While reducing program diversity may save on fixed costs, this is typically insufficient to compensate for consumer surplus losses due to low student mobility. Furthermore, decentralized financial incentives mechanisms may be ineffective since they may often promote program cuts when this is undesirable, and vice versa. These findings illustrate the difficulties with regulatory reforms that mainly aim to reduce costs. Hence, the question how to raise total spending on higher education (whether through public or private means) cannot be avoided.

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File URL: http://lirias.hubrussel.be/handle/123456789/2231
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Bibliographic Info

Paper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2008/01.

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Length: 23 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:hub:wpecon:200801

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Web page: http://research.hubrussel.be
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