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Reducing Product Diversity in Higher Education

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  • Kelchtermans, Stijn
  • Verboven, Frank

Abstract

Public systems of higher education have recently attempted to cut costs by providing financial incentives to institutions who reduce the diversity of their programs. We study the profit and welfare effects of reducing product diversity in higher education, against the background of a funding system reform in Flanders (Belgium). We find that dropping duplicated programs at individual institutions tends to be socially undesirable, due to the limited fixed cost and variable cost savings and the students' low willingness to travel to other institutions. Furthermore, we find that the financial incentives offered to drop programs may be very ineffective, leading to both undesirable reform and undesirable status quo. These findings emphasize the complexities in regulating product diversity in higher education, and serve as a word of caution towards the various decentralized financial incentive schemes that have recently been introduced.

Suggested Citation

  • Kelchtermans, Stijn & Verboven, Frank, 2007. "Reducing Product Diversity in Higher Education," CEPR Discussion Papers 6508, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6508
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    References listed on IDEAS

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    Cited by:

    1. Stijn Kelchtermans & Frank Verboven, 2008. "Regulation of Program Supply in Higher Education: Lessons from a Funding System Reform in Flanders," CESifo Economic Studies, CESifo, vol. 54(2), pages 204-228.

    More about this item

    Keywords

    higher education; product diversity;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • I2 - Health, Education, and Welfare - - Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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