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Private Investment in Higher Education: Comparing Alternative Funding Schemes

Author

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  • Bernhard Eckwert
  • Itzhak Zilcha

Abstract

This paper uses an overlapping generations framework to analyze the implications of different financing regimes in the education sector for human capital formation and economic welfare. Agents privately invest in education after they have received a noisy information signal about their abilities. The incentives of the individuals to invest in education are determined by the financing regime under which the economy operates. The paper analyzes and compares three financing regimes. Under each regime, the payback obligation of an educational loan is contingent, to some extent, on an individual’s future income.

Suggested Citation

  • Bernhard Eckwert & Itzhak Zilcha, 2008. "Private Investment in Higher Education: Comparing Alternative Funding Schemes," CESifo Working Paper Series 2395, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2395
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp2395.pdf
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    References listed on IDEAS

    as
    1. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    2. Nicholas Barr & Iain Crawford, 1998. "Funding Higher Education in an Age of Expansion," Education Economics, Taylor & Francis Journals, vol. 6(1), pages 45-70.
    3. Lleras,Miguel Palacios, 2004. "Investing in Human Capital," Cambridge Books, Cambridge University Press, number 9780521828406, April.
    4. Viaene, Jean-Marie & Zilcha, Itzhak, 2002. "Capital markets integration, growth and income distribution," European Economic Review, Elsevier, vol. 46(2), pages 301-327, February.
    5. Checchi,Daniele, 2008. "The Economics of Education," Cambridge Books, Cambridge University Press, number 9780521066464, April.
    6. David Greenaway & Michelle Haynes, 2003. "Funding Higher Education in The UK: The Role of Fees and Loans," Economic Journal, Royal Economic Society, vol. 113(485), pages 150-166, February.
    7. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Lochner, Lance & Monge-Naranjo, Alexander, 2014. "Student Loans and Repayment: Theory, Evidence and Policy," Working Papers 2014-40, Federal Reserve Bank of St. Louis, revised 12 Nov 2014.
    2. Hatsor, Limor, 2015. "Higher education funding: The value of information," Economics Letters, Elsevier, vol. 137(C), pages 230-233.
    3. Ben Heijdra & Fabian Kindermann & Laurie Reijnders, 2017. "Life in shakles? The quantitative implications of reforming the educational financing system," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 37-57, April.
    4. Arbel, Yuval & Bar-El, Ronen & Tobol, Yossi, 2017. "Equal Opportunity through Higher Education: Theory and Evidence on Privilege and Ability," IZA Discussion Papers 10564, Institute for the Study of Labor (IZA).
    5. repec:eee:soceps:v:62:y:2018:i:c:p:13-30 is not listed on IDEAS
    6. Viaene, Jean-Marie & Zilcha, Itzhak, 2013. "Public funding of higher education," Journal of Public Economics, Elsevier, vol. 108(C), pages 78-89.
    7. repec:bla:ijethy:v:13:y:2017:i:2:p:217-231 is not listed on IDEAS
    8. Bernhard Eckwert & Itzhak Zilcha, 2016. "Student Loans: When is Risk Sharing Desirable?," CESifo Working Paper Series 5718, CESifo Group Munich.
    9. Bernhard Eckwert & Itzhak Zilcha, 2014. "Higher Education: Subsidizing Tuition versus Subsidizing Student Loans," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(6), pages 835-853, December.

    More about this item

    Keywords

    higher education; funding regimes; human capital; welfare;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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