IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Should universities be subsidized? – A reference point view

  • Eva Berde

    ()

    (Corvinus University of Budapest)

Registered author(s):

    Because of the central importance of higher education and its long-turn positive extern effects on the whole society, the government often might wish to enforce its will on the universities through the subsidy it provides to them. Thus the question arises: what are the welfare consequences of state subsidies offered to universities? I try to answer this question with the recently developed tools of the so-called reference point theory, established by Oliver Hart and his coauthors. In my model the two participants are the government and the university. The university is controlled exclusively by a rector and the representative of the government is the administrator. The objective of the administrator is to maximize public welfare, whereas the rector maximizes her own payoff. The administrator offers a subsidy that comes together with the obligation to fulfill the state's instructions. Since these ‘handcuffs’ are usually against the rector's own interest, but subsidy is valuable to the rector, there is a tradeoff. I investigate the optimal behavior of the rector in two cases: a private university and a state owned public university. In spite of the simplified assumptions, this setup undoubtedly shows the ambiguous nature of subsidies.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://journalofeconomics.org/index.php/site/article/view/37/18
    Download Restriction: no

    Article provided by MIR Center for Socio-Economic Research in its journal International Journal of Economics.

    Volume (Year): 1 (2014)
    Issue (Month): 1 (January)
    Pages: 15-19

    as
    in new window

    Handle: RePEc:mir:mireco:v:1:y:2014:i:1:p:15-19
    Contact details of provider: Web page: http://www.journalofeconomics.org

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:mir:mireco:v:1:y:2014:i:1:p:15-19. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (S Marjan)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.