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Regulation of program supply in higher education. Lessons from a funding system reform

Author

Listed:
  • Kelchtermans, Stijn

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

  • Verboven, Frank

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

Abstract

It has become well documented that the performance gap between European and US universities is at least partly due to lower spending on higher education in Europe. Rather than raising the public budget or promoting private contributions, many governments have attempted to make public spending more efficient in various ways. This paper reports on results from a proposed funding system reform in Flanders (Belgium), which aimed to save costs by reducing the diversity and duplication of study programs. We draw the following lessons. While reducing program diversity may save on fixed costs, this is typically insufficient to compensate for consumer surplus losses due to low student mobility. Furthermore, decentralized financial incentives mechanisms may be ineffective since they may often promote program cuts when this is undesirable, and vice versa. These findings illustrate the difficulties with regulatory reforms that mainly aim to reduce costs. Hence, the question how to raise total spending on higher education (whether through public or private means) cannot be avoided.

Suggested Citation

  • Kelchtermans, Stijn & Verboven, Frank, 2008. "Regulation of program supply in higher education. Lessons from a funding system reform," Working Papers 2008/01, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  • Handle: RePEc:hub:wpecon:200801
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    File URL: http://lirias.hubrussel.be/handle/123456789/2231
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    More about this item

    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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