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Free Higher Education - Regressive Transfer or Implicit Loan ?

  • Vincent, VANDENBERGHE

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

Should access to higher education remain ‘free’ ? Theoretical answers to this question are at least twofold. First, public higher education is said to be regressive as a priviliged minority profits from extra human capital, and all the private benefits it generates, while the general public foots the bill. A frequent reply is that higher education students enjoying ‘free’ access are implicitly borrowing public money that they pay back when entering the labour market, via progressive income taxes. Using a simple lifecycle framework this paper produces realistic estimates of how much graduates are likely to ‘reimburse” society via income tax. Using Belgian data on higher education public expenditure and income taxes paid by both graduates and non-graduates over their lifetime, we show that the implicit reimbursement rate ranges from 37% to 95%. It is much higher for bachelors than master graduates, and for males

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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2005031.

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Length: 15
Date of creation: 01 Jun 2005
Date of revision:
Handle: RePEc:ctl:louvec:2005031
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  1. Bruce Chapman, 2001. "Australian Higher Education Financing: Issues for Reform," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 34(2), pages 195-204.
  2. Michael F. Förster, 2000. "Trends and Driving Factors in Income Distribution and Poverty in the OECD Area," OECD Labour Market and Social Policy Occasional Papers 42, OECD Publishing.
  3. Chapman, B., 1996. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," CEPR Discussion Papers 350, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  4. Bas Jacobs, 2002. "An investigation of education finance reform; graduate taxes and income contingent loans in the Netherlands," CPB Discussion Paper 9, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Johnstone, D. Bruce, 2004. "The economics and politics of cost sharing in higher education: comparative perspectives," Economics of Education Review, Elsevier, vol. 23(4), pages 403-410, August.
  6. W. Lee Hansen & Burton A. Weisbrod, 1969. "The Distribution of Costs and Direct Benefits of Public Higher Education: The Case of California," Journal of Human Resources, University of Wisconsin Press, vol. 4(2), pages 176-191.
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