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Political Economics of Higher Education Finance

Author

Listed:
  • Rainald Borck
  • Martin Wimbersky

Abstract

We study voting over higher education finance in an economy with risk averse households who are heterogeneous in income. We compare four different systems and analyse voters' choices among them: a traditional subsidy scheme, a pure loan scheme, income contingent loans and graduate taxes. Using numerical simulations, we find that majorities for income contingent loans or graduate taxes become more likely as the income distribution gets more equal. We also perform sensitivity analyses with respect to risk aversion and the elasticity of substitution between high skilled and low skilled workers.

Suggested Citation

  • Rainald Borck & Martin Wimbersky, 2009. "Political Economics of Higher Education Finance," CESifo Working Paper Series 2829, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2829
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    References listed on IDEAS

    as
    1. Dan Anderberg & Alessandro Balestrino, 2008. "The Political Economy of Post-Compulsory Education Policy with Endogenous Credit Constraints," CESifo Working Paper Series 2304, CESifo Group Munich.
    2. William R. Johnson, 2006. "Are Public Subsidies to Higher Education Regressive?," Education Finance and Policy, MIT Press, vol. 1(3), pages 288-315, June.
    3. Del Rey, Elena & Racionero, María, 2010. "Financing schemes for higher education," European Journal of Political Economy, Elsevier, vol. 26(1), pages 104-113, March.
    4. Creedy, John & Francois, Patrick, 1990. "Financing higher education and majority voting," Journal of Public Economics, Elsevier, vol. 43(2), pages 181-200, November.
    5. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, February.
    6. Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, Elsevier.
    7. Olivier de La Grandville & Rainer Klump, 2000. "Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions," American Economic Review, American Economic Association, vol. 90(1), pages 282-291, March.
    8. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
    9. Nicholas Barr, 2004. "Higher Education Funding," Oxford Review of Economic Policy, Oxford University Press, vol. 20(2), pages 264-283, Summer.
    10. De Fraja, Gianni, 2001. "Education Policies: Equity, Efficiency and Voting Equilibrium," Economic Journal, Royal Economic Society, vol. 111(471), pages 104-119, May.
    11. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
    12. Nerlove, Marc L, 1975. "Some Problems in the Use of Income-contingent Loans for the Finance of Higher Education," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 157-183, February.
    13. 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.
    14. 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.
    15. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-318, July.
    16. Raquel Fernandez & Richard Rogerson, 1995. "On the Political Economy of Education Subsidies," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 249-262.
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    Citations

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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.
    2. Maria Racionero & Elena Del Rey, 2012. "Choosing the type of income-contingent loan: risk-sharing versus risk-pooling," CEPR Discussion Papers 671, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    3. Rainald Borck & Silke Uebelmesser & Martin Wimbersky, 2015. "The Political Economics of Higher-Education Finance for Mobile Individuals," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(1), pages 82-105, March.
    4. repec:eee:pubeco:v:154:y:2017:i:c:p:1-9 is not listed on IDEAS
    5. De Donder, Philippe & Martinez-Mora, Francisco, 2017. "The political economy of higher education admission standards and participation gap," Journal of Public Economics, Elsevier, pages 1-9.
    6. Elena Del Rey & María Racionero, 2012. "Voting On Income‐Contingent Loans For Higher Education," The Economic Record, The Economic Society of Australia, pages 38-50.
    7. repec:bla:coecpo:v:35:y:2017:i:4:p:615-629 is not listed on IDEAS

    More about this item

    Keywords

    voting; higher education; financing scheme;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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