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

Subsidizing Enjoyable Education

  • Robert Dur
  • Amihai Glazer

We explain why means-tested college tuition and means-tested government grants to college students can be efficient. The critical idea is that attending college is both an investment good and a consumption good. If education has a consumption benefit and tuition is uniform, the marginal rich student is less smart than some poor people who choose not to attend college, thus reducing the social returns to education and increasing the college’s cost of education. We find that competition among profit-maximizing colleges results in means-tested tuition. In addition, to maximize the social returns to education government should means-test grants. We thus provide a rationale for means-tested tuition and grants which relies neither on capital market imperfections nor on redistributive objectives.

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://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-10/cesifo1_wp1560.pdf
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1560.

as
in new window

Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:ces:ceswps:_1560
Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Rothstein, J.M.Jesse M., 2004. "College performance predictions and the SAT," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 297-317.
  2. John Shea, 1997. "Does Parents' Money Matter?," NBER Working Papers 6026, National Bureau of Economic Research, Inc.
  3. Dennis Epple & Richard Romano & Holger Sieg, 2006. "Admission, Tuition, and Financial Aid Policies in the Market for Higher Education," Econometrica, Econometric Society, vol. 74(4), pages 885-928, 07.
  4. Theodore W. Schultz, 1960. "Capital Formation by Education," Journal of Political Economy, University of Chicago Press, vol. 68, pages 571.
  5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  6. repec:dgr:uvatin:2005036 is not listed on IDEAS
  7. Enrico Moretti, 2002. "Estimating the Social Return to Higher Education: Evidence From Longitudinal and Repeated Cross-Sectional Data," NBER Working Papers 9108, National Bureau of Economic Research, Inc.
  8. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  9. Dynarski, Susan, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 629-62, September.
  10. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
  11. Andersson, Fredrik & Konrad, Kai A., 2002. "Human capital investment and globalization in extortionary states
    [Humankapitalinvestitionen und Globalisierung in Ausbeutungsstaaten]
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-01, Social Science Research Center Berlin (WZB).
  12. Diego Restuccia & Carlos Urrutia, 2004. "Intergenerational Persistence of Earnings: The Role of Early and College Education," American Economic Review, American Economic Association, vol. 94(5), pages 1354-1378, December.
  13. Barbara Sianesi & John Van Reenen, 2003. "The Returns to Education: Macroeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 157-200, 04.
  14. Hare, P G & Ulph, D T, 1979. "On Education and Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S193-212, October.
  15. Susan Dynarski, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," NBER Working Papers 7756, National Bureau of Economic Research, Inc.
  16. Ulph, David, 1977. "On the optimal distribution of income and educational expenditure," Journal of Public Economics, Elsevier, vol. 8(3), pages 341-356, December.
  17. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  18. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, 04.
  19. Michael P. Keane, 2002. "Financial Aid, Borrowing Constraints, and College Attendance: Evidence from Structural Estimates," American Economic Review, American Economic Association, vol. 92(2), pages 293-297, May.
  20. Boadway, R. & Marceau, N. & Marchand, M., . "Investment in education and the time inconsistency of redistributive tax policy," CORE Discussion Papers RP -1219, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  21. Robert A.J. Dur & Coen N. Teulings, 2003. "Are Education Subsidies an Efficient Redistributive Device?," Tinbergen Institute Discussion Papers 03-024/3, Tinbergen Institute, revised 19 Sep 2003.
  22. Bas Jacobs & Sweder J. G. van Wijnbergen, 2007. "Capital-Market Failure, Adverse Selection, and Equity Financing of Higher Education," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 1-32, March.
  23. Annette Alstadsæter, 2003. "Income Tax, Consumption Value of Education, and the Choice of Educational Type," CESifo Working Paper Series 1055, CESifo Group Munich.
  24. Bovenberg, A Lans & Jacobs, Bas, 2001. "Redistribution and Education Subsidies are Siamese Twins," CEPR Discussion Papers 3099, C.E.P.R. Discussion Papers.
  25. Kane, Thomas J, 1994. "College Entry by Blacks since 1970: The Role of College Costs, Family Background, and the Returns to Education," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 878-911, October.
  26. Boadway, Robin & Keen, Michael, 2000. "Redistribution," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 12, pages 677-789 Elsevier.
  27. Fernandez, Raquel & Gali, Jordi, 1997. "To Each According to ...?: Markets, Tournaments, and The Matching Problem with Borrowing Constraints," Working Papers 97-11, C.V. Starr Center for Applied Economics, New York University.
  28. repec:dgr:uvatin:2002001 is not listed on IDEAS
  29. Coen Teulings & Thijs van Rens, 2008. "Education, Growth, and Income Inequality," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 89-104, February.
  30. Annette Alstadsæter, 2009. "Measuring the Consumption Value of Higher Education," CESifo Working Paper Series 2799, CESifo Group Munich.
  31. Coen N. Teulings & Thijs van Rens, 2002. "Education, Growth and Income Inequality," Tinbergen Institute Discussion Papers 02-001/3, Tinbergen Institute, revised 05 Mar 2003.
  32. McPherson, Michael S & Schapiro, Morton Owen, 1991. "Does Student Aid Affect College Enrollment? New Evidence on a Persistent Controversy," American Economic Review, American Economic Association, vol. 81(1), pages 309-18, March.
  33. Daniele Checchi, 2003. "Inequality in Incomes and Access to Education: A Cross-country Analysis (1960-95)," LABOUR, CEIS, vol. 17(2), pages 153-201, 06.
  34. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  35. Gianni De Fraja, 2005. "Reverse Discrimination And Efficiency In Education," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 1009-1031, 08.
  36. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
  37. Raquel Fernandez & Richard Rogerson, 1994. "On the political economy of education subsidies," Staff Report 185, Federal Reserve Bank of Minneapolis.
  38. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
  39. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  40. Carneiro, Pedro & Hansen, Karsten & Heckman, James, 2003. "Estimating distributions of treatment effects with an application to the returns to schooling and measurement of the effects of uncertainty on college choice," Working Paper Series 2003:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  41. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1, June.
  42. Zwick, Rebecca & Brown, Terran & Sklar, Jeffrey C., 2004. "California and the SAT: A Reanalysis of University of California Admissions Data," University of California at Berkeley, Center for Studies in Higher Education qt9hf3t044, Center for Studies in Higher Education, UC Berkeley.
  43. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College," NBER Working Papers 9546, National Bureau of Economic Research, Inc.
  44. Alstadsæter, Annette & Kolm, Anne-Sofie & Larsen, Birthe, 2005. "Money or Joy," Working Papers 23-2005, Copenhagen Business School, Department of Economics.
  45. Edward P. Lazear, 1975. "Education: Consumption or Production," NBER Working Papers 0104, National Bureau of Economic Research, Inc.
  46. James J. Heckman & Lance Lochner & Christopher Taber, 1999. "General Equilibrium Cost Benefit Analysis of Education and Tax Policies," NBER Working Papers 6881, National Bureau of Economic Research, Inc.
  47. Hessel Oosterbeek & Hans van Ophem, 2000. "Schooling choices: Preferences, discount rates, and rates of return," Empirical Economics, Springer, vol. 25(1), pages 15-34.
  48. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-86, June.
  49. Marcus Stanley, 2003. "College Education And The Midcentury Gi Bills," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 671-708, May.
  50. repec:dgr:uvatin:2005037 is not listed on IDEAS
  51. Robert J. Gary-Bobo & Alain Trannoy, 2008. "Efficient Tuition Fees and Examinations," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1211-1243, December.
  52. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts," NBER Working Papers 6385, National Bureau of Economic Research, Inc.
  53. Robert Dur, 2004. "Should Higher Education Subsidies Depend on Parental Income?," Oxford Review of Economic Policy, Oxford University Press, vol. 20(2), pages 284-297, Summer.
Full references (including those not matched with items on IDEAS)

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:ces:ceswps:_1560. 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: (Julio Saavedra)

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.