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Equal Opportunities in Education: Market Equilibrium and Public Policy

Author

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  • De Fraja, Gianni

Abstract

This paper investigates whether individual decisions lead to equality of opportunity in education, defined in the specific sense of irrelevance of parental income for university attendance. We show that, even if households can borrow in the capital market, the laissez-faire equilibrium exhibits an income bias, in the sense that individuals from high income households are more likely to attend university. We then study the welfare maximising policy of a utilitarian government. Its features are opposite to the free market equilibrium: with plausible assumptions, at low income levels, the tuition fee should be designed in such a way so as to create a bias in favour of low income households.

Suggested Citation

  • De Fraja, Gianni, 1999. "Equal Opportunities in Education: Market Equilibrium and Public Policy," CEPR Discussion Papers 2090, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2090
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    References listed on IDEAS

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    1. Barr, Nicholas, 1993. "Alternative funding resources for higher education," LSE Research Online Documents on Economics 280, London School of Economics and Political Science, LSE Library.
    2. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
    3. Boldrin, Michele, 2005. "Public education and capital accumulation," Research in Economics, Elsevier, vol. 59(2), pages 85-109, June.
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    5. P. Hare & D. Ulph, 1981. "Imperfect capital markets and the public provision of education," Public Choice, Springer, vol. 36(3), pages 481-507, January.
    6. Lazear, Edward, 1977. "Academic Achievement and Job Performance: Note," American Economic Review, American Economic Association, vol. 67(2), pages 252-254, March.
    7. Chapman, Bruce, 1997. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," Economic Journal, Royal Economic Society, vol. 107(442), pages 738-751, May.
    8. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-867, June.
    9. Lommerud, Kjell Erik, 1989. "Educational Subsidies When Relative Income Matters," Oxford Economic Papers, Oxford University Press, vol. 41(3), pages 640-652, July.
    10. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586.
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    12. Kenneth J. Arrow, 1971. "A Utilitarian Approach to the Concept of Equality in Public Expenditures," The Quarterly Journal of Economics, Oxford University Press, vol. 85(3), pages 409-415.
    13. Barr, Nicholas, 1997. "Student loans : towards a new public/private mix," LSE Research Online Documents on Economics 282, London School of Economics and Political Science, LSE Library.
    14. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-318, July.
    15. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
    16. von Weizsäcker, Robert K & Wigger, Berthold, 1998. "Risk, Resources and Education," CEPR Discussion Papers 1808, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Giorgio Brunello & Massimo Giannini, 2004. "Stratified or Comprehensive? The Economic Efficiency of School Design," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(2), pages 173-193, May.

    More about this item

    Keywords

    Education; student loans; University;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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