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Student and worker mobility under university and government competition

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  • Delpierre, Matthieu
  • Verheyden, Bertrand

Abstract

We provide a normative analysis of endogenous student and worker mobility in the presence of diverging interests between universities and governments. Student mobility generates a university competition effect which induces them to overinvest in education, whereas worker mobility generates a free-rider effect for governments, who are not willing to subsidize the education of agents who will work abroad. At equilibrium, the free-rider effect always dominates the competition effect, resulting in underinvestment in human capital. This inefficiency can be corrected under exogenous university budgets if a transnational transfer for mobile students is implemented. With endogenous income taxation, under the non-cooperative equilibrium between governments, the combination of the free-rider effect and fiscal competition leads to underinvestment in both teaching and research. Furthermore, the transnational transfer no longer restores efficiency. Instead, it can reinforce fiscal competition and imposes a tradeoff between research and human capital.

Suggested Citation

  • Delpierre, Matthieu & Verheyden, Bertrand, 2014. "Student and worker mobility under university and government competition," Journal of Public Economics, Elsevier, vol. 110(C), pages 26-41.
  • Handle: RePEc:eee:pubeco:v:110:y:2014:i:c:p:26-41 DOI: 10.1016/j.jpubeco.2013.11.012
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    Cited by:

    1. Laurent Dupont & Laure Morel & Claudine Guidat, 2015. "Innovative public-private partnership to support Smart City: the case of “Chaire REVES”," Post-Print hal-01332233, HAL.

    More about this item

    Keywords

    Student mobility; Worker mobility; University competition; Government competition;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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