IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Macroeconomic implications of competitive college admissions

  • Murat F. Iyigun
  • Andrew T. Levin

We present a public higher education model in which there exist indivisibilities in educational investment. Consequently, when demand for educational services exceed supply, a screening mechanism, which may potentially be imperfect, is required to choose the student body. We demonstrate how distortions or biases in screening--caused by parental factors--interact with the distribution of income to help explain the considerable differences across countries in the share of resources devoted to public higher education. Moderate degrees of admission bias lower the share of resources devoted to public education whereas higher levels of bias may have positive effects on public education supply. Thus, while lower screening biases lead to a better allocation of a given amount of spending on education, they do not necessarily lead to more political support for public education, and thereby to higher aggregate human capital and output. When wage rates are endogenous, the effects of screening biases on public higher education supply can be positive even for smaller biases. Moreover, higher inequality will lead to a lower share of resources devoted to public higher education when biases are relatively moderate.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

File URL:
Download Restriction: no

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 613.

in new window

Date of creation: 1998
Date of revision:
Handle: RePEc:fip:fedgif:613
Contact details of provider: Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551
Web page:

More information through EDIRC

Order Information: Web:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Fernández, Raquel, 1998. "Education and Borrowing Constraints: Tests Vs. Prices," CEPR Discussion Papers 1913, C.E.P.R. Discussion Papers.
  2. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  3. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  4. 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.
  5. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
  6. Perotti, Roberto, 1994. "Income distribution and investment," European Economic Review, Elsevier, vol. 38(3-4), pages 827-835, April.
  7. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  8. Peltzman, Sam, 1973. "The Effect of Government Subsidies-in-Kind on Private Expenditures: The Case of Higher Education," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 1-27, Jan.-Feb..
  9. Benabou, R., 1996. "Unequal Societies," Working Papers 96-17, C.V. Starr Center for Applied Economics, New York University.
  10. Radner, Roy & Miller, L S, 1970. "Demand and Supply in U. S. Higher Education: A Progress Report," American Economic Review, American Economic Association, vol. 60(2), pages 326-34, May.
  11. Mark Gradstein & Moshe Justman, . "Democratic Choice of an Education System: Implications for Growth and Income Distribution," CARESS Working Papres 97-05, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedgif:613. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.