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Regulation of Program Supply in Higher Education: Lessons from a Funding System Reform in Flanders

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  • Stijn Kelchtermans

Abstract

It has become well documented that the performance gap between European and US universities is at least partly due to lower spending on higher education in Europe. Rather than raising the public budget or promoting private contributions, many governments have attempted to make public spending more efficient in various ways. This article reports the results from a proposed funding system reform in Flanders (Belgium), which aimed to save costs by reducing the diversity and duplication of study programs. We draw the following lessons. While reducing program diversity may save on fixed costs, this is typically insufficient to compensate for consumer surplus losses due to low student mobility. Furthermore, decentralized financial incentives mechanisms may be ineffective since they may often promote program cuts when this is undesirable, and vice versa. These findings illustrate the difficulties with regulatory reforms that mainly aim to reduce costs. Hence, the question how to raise total spending on higher education (whether through public or private means) cannot be avoided. (JEL codes: I20; I23; C25) Copyright , Oxford University Press.

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  • Stijn Kelchtermans, 2008. "Regulation of Program Supply in Higher Education: Lessons from a Funding System Reform in Flanders," CESifo Economic Studies, CESifo Group, vol. 54(2), pages 204-228, June.
    • Handle: RePEc:oup:cesifo:v:54:y:2008:i:2:p:204-228
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifn016
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    1. Terry Long, B.Bridget, 2004. "How have college decisions changed over time? An application of the conditional logistic choice model," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 271-296.
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    3. Stijn Kelchtermans & Frank Verboven, 2007. "Reducing product diversity in higher education," Working Papers of Department of Economics, Leuven ces0726, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    4. Manuel Bagues & Mauro Sylos Labini & Natalia Zinovyeva, 2008. "Differential Grading Standards and University Funding: Evidence from Italy," CESifo Economic Studies, CESifo Group, vol. 54(2), pages 149-176.
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    Cited by:

    1. Frederick van der Ploeg & Reinhilde Veugelers, 2008. "Towards Evidence-based Reform of European Universities," CESifo Economic Studies, CESifo Group, vol. 54(2), pages 99-120.
    2. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 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.
    3. Gerhard Kempkes & Carsten Pohl, 2008. "Do Institutions Matter for University Cost Efficiency? Evidence from Germany," CESifo Economic Studies, CESifo Group, vol. 54(2), pages 177-203.

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    More about this item

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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