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The Design of the University System

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  • Gianni De Fraja

    ()

  • Paola Valbonesi

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. 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 that 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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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 09/19.

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Date of creation: Sep 2009
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Handle: RePEc:lec:leecon:09/19

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Keywords: Higher education; The organisation of the university sector.;

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  1. Facciamo i conti
    by Alberto Bagnai in Goofynomics on 2014-02-25 00:03:00
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Cited by:
  1. De Fraja, Gianni & Valbonesi, Paola, 2012. "The design of the university system," Journal of Public Economics, Elsevier, vol. 96(3), pages 317-330.
  2. Cremer, Helmuth & Maldonado, Dario, 2013. "Mixed oligopoly in education," TSE Working Papers 13-381, Toulouse School of Economics (TSE).
  3. Gianni De Fraja, 2011. "A Theoretical Analysis of Public Funding for Research," Discussion Papers in Economics 11/31, Department of Economics, University of Leicester, revised Jun 2011.
  4. 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.
  5. Manna, Ester, 2013. "Mixed Duopoly with Motivated Teachers," MPRA Paper 52041, University Library of Munich, Germany.
  6. 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.
  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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