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Heterogeneous Individuals and the Optimal Level of Higher Education

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  • Ryuhei Okumura
  • Dapeng Cai

Abstract

We examine the effects of public funding on higher education within a game-theoretical framework, in which universities choose students according to their abilities to learn, whereas to widen the opportunity of receiving higher education, the tuition fees are partially financed by a graduate-tax subsidy system. We find that when individuals are impatient, partial public financing of higher education results in an overinvestment in higher education, which is, however, desirable in terms of improved access.

Suggested Citation

  • Ryuhei Okumura & Dapeng Cai, 2009. "Heterogeneous Individuals and the Optimal Level of Higher Education," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(1), pages 37-50, March.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200903)65:1_37:hiatol_2.0.tx_2-k
    DOI: 10.1628/001522108X444189
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    References listed on IDEAS

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    1. Mathias Hungerbühler & Etienne Lehmann & Alexis Parmentier & Bruno Van Der Linden, 2006. "Optimal Redistributive Taxation in a Search Equilibrium Model," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 743-767.
    2. Guy Laroque, 2005. "Income Maintenance and Labor Force Participation," Econometrica, Econometric Society, vol. 73(2), pages 341-376, March.
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    4. Boadway, Robin & Cuff, Katherine & Marceau, Nicolas, 2003. "Redistribution and employment policies with endogenous unemployment," Journal of Public Economics, Elsevier, vol. 87(11), pages 2407-2430, October.
    5. Marceau, Nicolas & Boadway, Robin, 1994. " Minimum Wage Legislation and Unemployment Insurance as Instruments for Redistribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(1), pages 67-81.
    6. Robin Boadway & Katherine Cuff, 1999. "Monitoring Job Search as an Instrument For Targeting Transfers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 317-337, August.
    7. Boone, Jan & Bovenberg, Lans, 2004. "The optimal taxation of unskilled labor with job search and social assistance," Journal of Public Economics, Elsevier, vol. 88(11), pages 2227-2258, September.
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    More about this item

    Keywords

    higher education; heterogeneous individuals; graduate tax;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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