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Quality of Education and the Number of Students: A General-Equilibrium Analysis

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  • Gabrielle Demange
  • Robert Fenge
  • Silke Uebelmesser

Abstract

For a closed economy, we analyze the relation between the quality of higher education and the number of students. Within a two-period general-equilibrium model, we derive the optimal education policy - i.e., quality of and access restrictions to higher education - with observable ability, and contrast this with a setting where ability is unobservable and financial instruments are restricted to either taxes or fees. If the number of students increases with quality, then there are too many students with tax financing and the quality level is too low - and vice versa with fee financing. Results are not clear-cut when higher quality leads to a lower number of students.

Suggested Citation

  • Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2015. "Quality of Education and the Number of Students: A General-Equilibrium Analysis," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(3), pages 456-477, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201509)171:3_456:qoeatn_2.0.tx_2-t
    DOI: 10.1628/093245613X14285667557478
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    1. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
    2. Gabrielle Demange, 2008. "The Provision of Higher Education in a Global World—Analysis and Policy Implications," CESifo Economic Studies, CESifo Group, vol. 54(2), pages 248-276, June.
    3. Andersson, Fredrik & Konrad, Kai A., 2003. "Human capital investment and globalization in extortionary states," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1539-1555, August.
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    More about this item

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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