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Funding, Competition And Quality In Higher Education

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  • Alexander Kemnitz

Abstract

This paper explores the impact of university finance reforms on teaching quality. It is shown that the graduate tax can achieve efficiency with tuition fees administered by the government, while student grants, pure and income contingent loans are bound to fail. All options are inefficient when universities have the autonomy to set tuition fees. Then, pure loans dominate the graduate tax and are more efficient than income contingent loans unless peer group effects are strong. However, properly chosen uniform administered fees create an even higher surplus. Moreover, pure loans may make the majority off students worse of than a central assignment system with very poor quality incentives.
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  • Alexander Kemnitz, 2004. "Funding, Competition And Quality In Higher Education," Royal Economic Society Annual Conference 2004 130, Royal Economic Society.
  • Handle: RePEc:ecj:ac2004:130
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    References listed on IDEAS

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    1. Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-353, September.
    2. Rey, Elena Del, 2001. "Teaching versus Research: A Model of State University Competition," Journal of Urban Economics, Elsevier, vol. 49(2), pages 356-373, March.
    3. Robin Boadway & Nicolas Marceau & Maurice Marchand, 1996. "Issues in decentralizing the provision of education," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 311-327, July.
    4. 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.
    5. Gordon C. Winston, 1999. "Subsidies, Hierarchy and Peers: The Awkward Economics of Higher Education," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 13-36, Winter.
    6. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-586, June.
    7. Egon P. Franck & Bruno Schönfelder, 2000. "On The Role Of Competition In Higher Education – Uses And Abuses Of The Economic Metaphor," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 52(3), pages 214-237, July.
    8. De Fraja, Gianni, 2001. "Education Policies: Equity, Efficiency and Voting Equilibrium," Economic Journal, Royal Economic Society, vol. 111(471), pages 104-119, May.
    9. Barr, Nicholas, 1993. "Alternative Funding Resources for Higher Education," Economic Journal, Royal Economic Society, vol. 103(418), pages 718-728, May.
    10. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    11. David Greenaway & Michelle Haynes, 2003. "Funding Higher Education in The UK: The Role of Fees and Loans," Economic Journal, Royal Economic Society, vol. 113(485), pages 150-166, February.
    12. 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 702-722, October.
    13. 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. Lisa Grazzini & Annalisa Luporini & Alessandro Petretto, 2010. "Competition between State Universities," Working Papers - Economics wp2010_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    2. Joan Rosselló, 2007. "Does a public university system avoid the stratification of public universities and the segregation of students?," DEA Working Papers 26, Universitat de les Illes Balears, Departament d'Economía Aplicada.
    3. Ordine, Patrizia & Rose, Giuseppe, 2008. "The supply of education quality in a spatial model with asymmetric moving costs," Research in Economics, Elsevier, vol. 62(4), pages 197-214, December.
    4. Patrizia Ordine & Giuseppe Rose, 2007. "Students' Mobility and Regional Disparities in Quality and Returns to Education in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 66(2), pages 149-176, July.
    5. John Beath & Joanna Poyago-Theotoky & David Ulph, 2005. "University Funding Systems and their Impact on Research and Teaching: A General Framework," Discussion Paper Series 2005_2, Department of Economics, Loughborough University.

    More about this item

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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