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The welfare effects of discriminating between in-state and out-of-state students

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  • Hübner, Malte

Abstract

In countries with a decentralized provision of higher education, local governments have incentives to levy higher fees on out-of-state students. This paper analyzes the implications of such preferential fee regimes for welfare and the number of students in a federation by means of a theoretical model in which higher education policies are determined non-cooperatively by local governments. In contrast to the literature on preferential tax regimes (e.g. Keen, 2001; Haupt and Peters, 2005), in my model, a restriction of preferential fee regimes raises federal welfare and enrollment in higher education.

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  • Hübner, Malte, 2012. "The welfare effects of discriminating between in-state and out-of-state students," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 364-374.
    • Handle: RePEc:eee:regeco:v:42:y:2012:i:1:p:364-374
    DOI: 10.1016/j.regsciurbeco.2011.06.005
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    1. Groen, Jeffrey A. & White, Michelle J., 2004. "In-state versus out-of-state students: the divergence of interest between public universities and state governments," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1793-1814, August.
    2. Justman, Moshe & Thisse, Jacques-Francois, 1997. "Implications of the mobility of skilled labor for local public funding of higher education," Economics Letters, Elsevier, vol. 55(3), pages 409-412, September.
    3. Kemnitz, Alexander, 2005. "Educational Federalism and the Quality Effects of Tuition Fees," Discussion Papers 617, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    4. Keen, Michael, 2001. "Preferential Regimes Can Make Tax Competition Less Harmful," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 757-62, December.
    5. Oliver Busch & Benjamin Weigert, 2010. "Where have all the graduates gone? Internal cross-state migration of graduates in Germany 1984–2004," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 559-572, June.
    6. Mechtenberg, Lydia & Strausz, Roland, 2006. "The Bologna Process: How student mobility affects multi-cultural skills and educational quality," SFB 649 Discussion Papers 2006-018, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    7. Lydia Mechtenberg & Roland Strausz, 2008. "The Bologna process: how student mobility affects multi-cultural skills and educational quality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(2), pages 109-130, April.
    8. Noorbakhsh, Abbas & Culp, David, 2002. "The demand for higher education: Pennsylvania's nonresident tuition experience," Economics of Education Review, Elsevier, vol. 21(3), pages 277-286, June.
    9. Janeba, Eckhard & Smart, Michael, 2003. "Is Targeted Tax Competition Less Harmful Than Its Remedies?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(3), pages 259-280, May.
    10. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(6), pages 587-606, December.
    11. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 247-258, May.
    12. Janeba, Eckhard & Peters, Wolfgang, 1999. "Tax Evasion, Tax Competition and the Gains from Nondiscrimination: The Case of Interest Taxation in Europe," Economic Journal, Royal Economic Society, vol. 109(452), pages 93-101, January.
    13. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    14. Keen, Michael, 2001. "Preferential Regimes Can Make Tax Competition Less Harmful," National Tax Journal, National Tax Association;National Tax Journal, vol. 54(4), pages 757-762, December.
    15. Haupt, Alexander & Peters, Wolfgang, 2005. "Restricting preferential tax regimes to avoid harmful tax competition," Regional Science and Urban Economics, Elsevier, vol. 35(5), pages 493-507, September.
    16. Alejandro Esteller-Moré & Albert Solé-Ollé, 2002. "Tax Setting in a Federal System: The Case of Personal Income Taxation in Canada," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(3), pages 235-257, May.
    17. Schwager, Robert, 2007. "Public Universities, Tuition and Competition: A Tiebout Model," ZEW Discussion Papers 07-056, ZEW - Leibniz Centre for European Economic Research.
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    Cited by:

    1. Alexander Haupt & Tim Krieger & Thomas Lange, 2011. "Competition for the International Pool of Talent: Education Policy and Student Mobility," Working Papers CIE 35, Paderborn University, CIE Center for International Economics.
    2. Alexander Haupt & Tim Krieger & Thomas Lange, 2016. "Competition for the international pool of talent," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(4), pages 1113-1154, October.

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    More about this item

    Keywords

    Higher education; Tuition fees; Preferential tax regimes;
    All these keywords.

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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