Voting On Income‐Contingent Loans For Higher Education
We consider risk-averse individuals who differ in two characteristics - ability to benefit from education and inherited wealth - and analyze higher education participation under two alternative financing schemes - tax subsidy and (risk-sharing) income-contingent loans. With decreasing absolute risk aversion, wealthier individuals are more likely to undertake higher education despite the fact that, according to the stylized financing schemes we consider, individuals do not pay any up-front financial cost of education. We then determine which financing scheme arises when individuals are allowed to vote between schemes. We show that the degree of risk aversion plays a crucial role in determining which financing scheme obtains a majority, and that the composition of the support group for each financing scheme can be of two different types.
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Volume (Year): 88 (2012)
Issue (Month): s1 (06)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chapman, Bruce, 2006.
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2010/17, Institut d'Economia de Barcelona (IEB).
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- Garcia-Penalosa, Cecilia & Walde, Klaus, 2000. "Efficiency and Equity Effects of Subsidies to Higher Education," Oxford Economic Papers, Oxford University Press, vol. 52(4), pages 702-22, October.
- Dan Anderberg & Alessandro Balestrino, 2008. "The Political Economy of Post-Compulsory Education Policy with Endogenous Credit Constraints," CESifo Working Paper Series 2304, CESifo Group Munich.
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