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Financing Higher Education and Labor Mobility

Author

Listed:
  • Gabrielle Demange
  • Robert Fenge
  • Silke Übelmesser

Abstract

This paper analyzes how mobility of post-graduate skilled workers and students across different countries affects the quality level of higher education and the way education is financed. We start by examining a closed economy. In the presence of imperfect credit markets the education level with pure fee-financing is lower than the optimal level. If the credit market imperfections are not too large, a mix of tax- and fee-financing is optimal. The reason for this is that with pure fee-financing too few individuals decide to study. With mobility of skilled workers, both countries have an incentive to attract foreign skilled mobile workers as tax-payers while - at least partially - free-riding on the other country’s provision of education. Both countries thus increase the tuition fee above the optimum and change the level of education correspondingly. If countries maintain the financing mix foreign skilled workers are attracted by suboptimal levels of educational quality. Allowing also for mobile students may intensify the upward race of fees. The case of free-riding on the education provided by other countries may be strengthened. However, countries may anticipate this race and abstain from engaging in fee competition in the first place.

Suggested Citation

  • Gabrielle Demange & Robert Fenge & Silke Übelmesser, 2008. "Financing Higher Education and Labor Mobility," CESifo Working Paper Series 2362, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2362
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp2362.pdf
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    References listed on IDEAS

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    1. Kemnitz, Alexander, 2005. "Educational Federalism and the Quality Effects of Tuition Fees," Discussion Papers 617, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    2. Thum, Claudio & Uebelmesser, Silke, 2003. "Mobility and the Role of Education as a Commitment Device," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(5), pages 549-564, September.
    3. Lydia Mechtenberg & Roland Strausz, 2008. "The Bologna process: how student mobility affects multi-cultural skills and educational quality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(2), pages 109-130, April.
    4. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
    5. Creedy, John & Francois, Patrick, 1990. "Financing higher education and majority voting," Journal of Public Economics, Elsevier, vol. 43(2), pages 181-200, November.
    6. Matthias Parey & Fabian Waldinger, 2011. "Studying Abroad and the Effect on International Labour Market Mobility: Evidence from the Introduction of ERASMUS," Economic Journal, Royal Economic Society, vol. 121(551), pages 194-222, March.
    7. Panu Poutvaara, 2004. "Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?," CESifo Economic Studies, CESifo, vol. 50(4), pages 663-684.
    8. Elena Del Rey, 2001. "Economic Integration and Public Provision of Education," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 28(2), pages 203-218, June.
    9. Garcia-Penalosa, Cecilia & Walde, Klaus, 2000. "Efficiency and Equity Effects of Subsidies to Higher Education," Oxford Economic Papers, Oxford University Press, vol. 52(4), pages 702-722, October.
    10. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-318, July.
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    Citations

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    Cited by:

    1. Gabrielle Demange & Robert Fenge & Silke Uebelmesser, 2014. "Financing Higher Education in a Mobile World," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(3), pages 343-371, June.
    2. Tim Krieger & Thomas Lange, 2010. "Education policy and tax competition with imperfect student and labor mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(6), pages 587-606, December.
    3. Gabrielle Demange & Robert Fenge, 2010. "Competition in the quality of higher education: the impact of students' mobility," Working Papers halshs-00564912, HAL.
    4. Domenico Scalera, 2012. "Skilled Migration And Education Policies: Is There Still Scope For A Bhagwati Tax?," Manchester School, University of Manchester, vol. 80(4), pages 447-467, July.
    5. Haupt, Alexander, 2012. "The evolution of public spending on higher education in a democracy," European Journal of Political Economy, Elsevier, vol. 28(4), pages 557-573.
    6. Delpierre, Matthieu & Verheyden, Bertrand, 2014. "Student and worker mobility under university and government competition," Journal of Public Economics, Elsevier, vol. 110(C), pages 26-41.

    More about this item

    Keywords

    higher education; labor migration; tuition fees; taxes;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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