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

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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File URL: http://amsacta.unibo.it/3957/1/WP892.pdf
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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp892.

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Date of creation: Jul 2013
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Handle: RePEc:bol:bodewp:wp892
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Keywords:

Find related papers by 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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  1. 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.
  2. McMahon, Walter W, 1976. "Influences on Investment by Blacks in Higher Education," American Economic Review, American Economic Association, vol. 66(2), pages 320-23, May.
  3. Shintaro Yamaguchi, 2012. "Tasks and Heterogeneous Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 1 - 53.
  4. 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 1361-63, December.
  5. 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.
  6. James Heckman & Pedro Carneiro, 2003. "Human Capital Policy," NBER Working Papers 9495, National Bureau of Economic Research, Inc.
  7. Jo Blanden & Stephen Machin, 2004. "Educational inequality and the expansion of UK higher education," LSE Research Online Documents on Economics 17497, London School of Economics and Political Science, LSE Library.
  8. 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).
  9. 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.
  10. 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, 07.
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Cited by:

  1. De Donder, Philippe & Martinez-Mora, Francisco, 2015. "On the Political Economy of University Admission Standards," TSE Working Papers 15-582, Toulouse School of Economics (TSE).

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