Local Public Funding of Higher Education when Students and Skilled Workers are Mobile
AbstractThe interregional mobility of high skilled workers might induce an underinvestment in local public higher education when sub-federal entities independently decide on education expenditures to maximize local output. This well-known result is due to interregional spillovers and provides a justification for coordinated education policy or rather a federal intervention. However, things might change completely when taking into account the interregional mobility of students. Now, local education expenditures not only affect labor migration (through wage differentials) but also student migration flows. The model in this paper then shows that local output maximization does not necessarily imply underprovision of higher education, since regions now have an incentive to attract students as future human capital. The stay rates of graduates in equilibrium and the sensitivity of wages to migration are key determinants of local policy. Furthermore, results depend on local government objectives or rather the weighting of natives relative to foreigners. Therefore, the paper also considers natives’ preferred local policy.
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Bibliographic InfoPaper provided by University of Paderborn, CIE Center for International Economics in its series Working Papers with number 11.
Length: 30 pages
Date of creation: May 2008
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More information through EDIRC
higher education; student mobility; labor mobility; local public finance;
Find related papers by JEL classification:
- I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-07 (All new papers)
- NEP-EDU-2008-06-07 (Education)
- NEP-GEO-2008-06-07 (Economic Geography)
- NEP-HRM-2008-06-07 (Human Capital & Human Resource Management)
- NEP-LAB-2008-06-07 (Labour Economics)
- NEP-MIG-2008-06-07 (Economics of Human Migration)
- NEP-URE-2008-06-07 (Urban & Real Estate Economics)
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