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Reducing product diversity in higher education

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Listed author(s):
  • Kelchtermans, Stijn

    ()

    (Hogeschool-Universiteit Brussel (HUB), Belgium
    Katholieke Universiteit Leuven, Belgium)

  • Verboven, Frank

    ()

    (Katholieke Universiteit Leuven, Belgium
    C.E.P.R., London, United Kingdom)

Abstract

Public systems of higher education have recently attempted to cut costs by providing .nancial incentives to institutions who reduce the diversity of their programs. We study the pro and welfare e¤ects 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 o¤ered to drop programs may be very ineffective, leading to both undesirable reform and undesirable status quo. These fondings emphasize the complexities in regulating product diversity in higher education, and serve as a word of caution towards the various decentralized .nancial incentive schemes that have recently been introduced.

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File URL: http://lirias.hubrussel.be/handle/123456789/2190
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Paper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2007/14.

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Length: 33 pages
Date of creation: Sep 2007
Handle: RePEc:hub:wpecon:200714
Contact details of provider: Web page: http://research.hubrussel.be

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

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  1. Bas Jacobs & Frederick Van Der Ploeg, 2006. "Guide to reform of higher education: a European perspective," Economic Policy, CEPR;CES;MSH, vol. 21(47), pages 535-592, 07.
  2. Hausman, Jerry A & Leonard, Gregory K, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 237-263, September.
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  4. 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.
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  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  9. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
  10. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, January.
  11. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
  12. Ted Bergstrom & Judy Roberts & Dan Rubinfeld & Perry Shapiro, 1988. "A Test for Efficiency in the Supply of Local Public Education," Papers _036, University of Michigan, Department of Economics.
  13. Kelchtermans, Stijn & Verboven, Frank, 2006. "Participation and Schooling in a Public System of Higher Education," CEPR Discussion Papers 5690, C.E.P.R. Discussion Papers.
  14. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  15. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
  16. Bergstrom, Theodore C. & Roberts, Judith A. & Rubinfeld, Daniel L. & Shapiro, Perry, 1988. "A test for efficiency in the supply of public education," Journal of Public Economics, Elsevier, vol. 35(3), pages 289-307, April.
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Cited by:

  1. Gabrielle Demange, 2008. "The Provision of Higher Education in a Global World—Analysis and Policy Implications," CESifo Economic Studies, CESifo, vol. 54(2), pages 248-276, June.

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