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The Political Economics of Higher Education Finance for Mobile Individuals

  • Rainald Borck
  • Silke Uebelmesser
  • Martin Wimbersky

We study voting over higher education finance in an economy with two regions and two separated labor markets. Households differ in their financial endowment and their children’s ability. Non-students are immobile. Students decide where to study; they return home after graduation with exogenous probability. The voters of the two regions decide on whether to subsidize higher education costs or whether to rely on tuition fees only. We find that in equilibrium, in both regions a majority votes for subsidies when the return probability is sufficiently small. When that probability is large, both regions opt for full tuition finance. Interestingly, the higher the return probability, the smaller are the equilibrium subsidy rates, but the larger are the numbers of exchange students.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-07/cesifo1_wp3877.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3877.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3877
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  1. Creedy, John & Francois, Patrick, 1990. "Financing higher education and majority voting," Journal of Public Economics, Elsevier, vol. 43(2), pages 181-200, November.
  2. Rainald Borck & Martin Wimbersky, 2009. "Political Economics of Higher Education Finance," CESifo Working Paper Series 2829, CESifo Group Munich.
  3. Poutvaara, Panu, 2004. "Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?," Munich Reprints in Economics 19296, University of Munich, Department of Economics.
  4. Iñigo Iturbe Ormaetxe & Carmen Beviá, 2000. "Redistribution And Subsidies For Higher Education," Working Papers. Serie AD 2000-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. 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, 06.
  6. Del Rey, Elena & Racionero, María, 2010. "Financing schemes for higher education," European Journal of Political Economy, Elsevier, vol. 26(1), pages 104-113, March.
  7. Marcel Gerard, 2007. "Financing Bologna: Which Country will Pay for Foreign Students?," Education Economics, Taylor & Francis Journals, vol. 15(4), pages 441-454.
  8. Panu Poutvaara, 2003. "Educating Europe," Public Economics 0302008, EconWPA.
  9. Fernandez, Raquel & Rogerson, Richard, 1995. "On the Political Economy of Education Subsidies," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 249-62, April.
  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, vol. 7(3), pages 247-258, May.
  11. Baruch, Yehuda & Budhwar, Pawan S. & Khatri, Naresh, 2007. "Brain drain: Inclination to stay abroad after studies," Journal of World Business, Elsevier, vol. 42(1), pages 99-112, March.
  12. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  13. Dreher, Axel & Poutvaara, Panu, 2011. "Foreign Students and Migration to the United States," World Development, Elsevier, vol. 39(8), pages 1294-1307, August.
  14. 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.
  15. 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.
  16. Panu Poutvaara, 2008. "Public and Private Education in an Integrated Europe: Studying to Migrate and Teaching to Stay?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(3), pages 591-608, 09.
  17. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-18, July.
  18. 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 702-22, October.
  19. 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.
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