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Student and Worker Mobility under University and Government Competition

  • Matthieu Delpierre
  • Bertrand Verheyden

We provide a normative analysis of endogenous student and worker mobility in the presence of diverging interests between universities and governments. Student mobility generates a university competition effect which induces them to overinvest in education, whereas worker mobility generates a free-rider effect for governments, who are not willing to subsidize the education of agents who will work abroad. At equilibrium, the free-rider effect always dominates the competition effect, resulting in underinvestment in human capital and overinvestment in research. This inefficiency can be corrected if a transnational transfer for mobile students is implemented. With endogenous income taxation, we show that the strength of fiscal competition increases with human capital production. Consequently, supranational policies aimed at promoting teaching quality reduce tax revenues at the expense of research.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-04/cesifo1_wp3415.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3415.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3415
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  1. Panu Poutvaara, 2003. "Educating Europe," Public Economics 0302008, EconWPA.
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  9. DEL REY, Elena, 2000. "Teaching versus research: a model of state university competition," CORE Discussion Papers 2000030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 247-258, May.
  11. 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.
  12. Justman, M. & Thisse, J.-F., . "Implications of the mobility of skilled labor for local public funding of higher education," CORE Discussion Papers RP 1296, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Alexander Haupt & Eckhard Janeba, 2009. "Education, redistribution and the threat of brain drain," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(1), pages 1-24, February.
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  25. Charles T. Clotfelter, 1999. "The Familiar but Curious Economics of Higher Education: Introduction to a Symposium," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 3-12, Winter.
  26. Thomas Lange, 2009. "Public Funding of Higher Education when Students and Skilled Workers are Mobile," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(2), pages 178-199, June.
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