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Public funding of higher education

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  • Viaene, Jean-Marie
  • Zilcha, Itzhak

Abstract

Recent criticism from different sides has expressed the view that, with scarce resources, there is little justification for massive public funding of higher education. Central to the debate is the conjecture that colleges and universities use their resources inefficiently and focus insufficiently on their mission to expand students' human potential. Our aim in this paper is to examine the theoretical premises of this conjecture in a small open economy and uncover the conditions under which public investment in higher education is efficient and desirable. We analyze non-stationary equilibria of an OLG economy, characterized by perfect capital mobility, intergenerational transfers and a hierarchical education system. The government uses income tax revenues to finance basic education and support higher education that generates skilled labor. Given this, the following issues are considered: (a) the impact of education and international markets on the equilibrium number of low-skilled and skilled workers in each generation; (b) the economic efficiency of public subsidies to higher education in generating skilled human capital; (c) the endogenous support for a government's educational policies found in a political equilibrium.

Suggested Citation

  • Viaene, Jean-Marie & Zilcha, Itzhak, 2013. "Public funding of higher education," Journal of Public Economics, Elsevier, vol. 108(C), pages 78-89.
    • Handle: RePEc:eee:pubeco:v:108:y:2013:i:c:p:78-89
    DOI: 10.1016/j.jpubeco.2013.09.008
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    Cited by:

    1. Chaudhuri, Sarbajit & Ghosh, Arnab & Banerjee, Dibyendu, 2018. "Can public subsidy on education necessarily improve wage inequality?," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 165-177.
    2. Debora Di Gioacchino & Laura Sabani & Stefano Usai, 2023. "Why does education expenditure differ across countries? The role of income inequality, human capital and the inclusiveness of education systems," Working Papers in Public Economics 236, University of Rome La Sapienza, Department of Economics and Law.
    3. Marconi, G. & de Grip, A., 2014. "Education and growth with learning by doing," ROA Research Memorandum 010, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    4. Brezis, Elise S. & Hellier, Joël, 2018. "Social mobility at the top and the higher education system," European Journal of Political Economy, Elsevier, vol. 52(C), pages 36-54.
    5. Чернова Е. Г. & Ахобадзе Т. Д. & Малова А. С. & Салтан А. А., 2017. "Модели Финансирования Высшего Образования И Эффективность Деятельности Университетов Эмпирическое Исследование Европейского Опыта И Отечественная Практика," Вопросы образования // Educational Studies Moscow, National Research University Higher School of Economics, issue 3, pages 37-82.
    6. George Economides & Apostolis Philippopoulos & Stylianos Sakkas, 2021. "Redistributive policies in general equilibrium," JRC Working Papers on Territorial Modelling and Analysis 2021-08, Joint Research Centre.
    7. Magalhães, Graziella & Turchick, David, 2022. "Growth and inequality under different hierarchical education regimes," Economic Modelling, Elsevier, vol. 116(C).
    8. Di Gioacchino, Debora & Sabani, Laura & Tedeschi, Simone, 2019. "Individual preferences for public education spending: Does personal income matter?," Economic Modelling, Elsevier, vol. 82(C), pages 211-228.
    9. Bernhard Eckwert & Itzhak Zilcha, 2020. "The role of colleges within the higher education sector," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(2), pages 315-336, March.
    10. Cordelia Omodero, 2021. "Tax revenue collection or foreign borrowing: what fiscal tools enhance the educational development in Nigeria?," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(3), pages 231-243.
    11. George Economides & Hyun Park & Apostolis Philippopoulos & Stelios Sakkas, 2015. "On the Composition of Public Spending and Taxes," CESifo Working Paper Series 5510, CESifo.
    12. Giliberto Capano & Andrea Pritoni, 2020. "Exploring the determinants of higher education performance in Western Europe: A qualitative comparative analysis," Regulation & Governance, John Wiley & Sons, vol. 14(4), pages 764-786, October.
    13. Debora Di Gioacchino & Laura Sabani & Stefano Usai, 2022. "Intergenerational Upward (Im)mobility and Political Support of Public Education Spending," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(1), pages 49-76, March.
    14. Elisa S. Brezis & Joel Hellier, 2016. "Social Mobility and Higher-Education Policy," Working Papers 095, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.

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    More about this item

    Keywords

    Hierarchical education; Innate ability; Capital mobility; Education policy; Low-skilled workers; Skill formation;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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