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Arts vs Engineering: The Choice among Consumption of and Investment in Education

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Abstract

In this paper we develop a model in which students choose their university coursework based on both investment and consumption incentives. We show that these education decisions are socially inefficient. This result is driven by the fact that students do not consider an externality in the working environment of acquiring education for investment purposes. We show when and how it is possible to design tuition fees in such a way that students acquire the socially optimal level of education.

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  • R. Romano & A. Tampieri, 2013. "Arts vs Engineering: The Choice among Consumption of and Investment in Education," Working Papers wp892, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp892
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    References listed on IDEAS

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    1. Jo Blanden & Stephen Machin, 2013. "Educational Inequality and The Expansion of UK Higher Education," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(5), pages 578-596, November.
    2. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June.
    3. Shintaro Yamaguchi, 2012. "Tasks and Heterogeneous Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 1-53.
    4. McMahon, Walter W, 1976. "Influences on Investment by Blacks in Higher Education," American Economic Review, American Economic Association, vol. 66(2), pages 320-323, May.
    5. Carneiro, Pedro & Heckman, James J., 2003. "Human Capital Policy," IZA Discussion Papers 821, Institute for the Study of Labor (IZA).
    6. Hearn, James C., 1988. "Attendance at higher-cost colleges: Ascribed, socioeconomic, and academic influences on student enrollment patterns," Economics of Education Review, Elsevier, vol. 7(1), pages 65-76, February.
    7. Carl Sanders & Christopher Taber, 2012. "Life-Cycle Wage Growth and Heterogeneous Human Capital," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 399-425, July.
    8. Panzar, John C & Willig, Robert D, 1976. "Vindication of a "Common Mistake" in Welfare Economics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1361-1363, December.
    9. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
    10. Francesco Vona, 2011. "Does the Expansion of Higher Education Reduce Educational Inequality? Evidence from 12 European Countries," Documents de Travail de l'OFCE 2011-12, Observatoire Francais des Conjonctures Economiques (OFCE).
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    Cited by:

    1. Philippe De Donder & Francisco Martinez-Mora, 2015. "On the Political Economy of University Admission Standards," Discussion Papers in Economics 15/11, Department of Economics, University of Leicester.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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