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The University and the Prince: Public funds shaping university trajectories

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  • Andrea Borsato
  • Valentina Erasmo
  • André Lorentz

Abstract

We develop an evolutionary model to analyse the role of policymaker’s preferences about the amount and the direction of funding in determining the trajectories of universities. We draw a parallel between the research and the teaching environments, and the Schumpeter Mark I and Schumpeter Mark II innovative patterns, respectively. We obtain that shifting the priority from pure to utilitarian knowledge, and vice-versa, makes production and employment dynamics follow an inverted-U shape. Likewise, the complementarity between teaching and research typical of Humboldt-like organisations allows the system to experience the best performance when preferences are neither too research- nor too teaching-oriented. Moreover, a generalised increase in funds is not effective if the distribution mechanisms are untouched and prioritise university reputation. Finally, a Baumol’s cost disease arises when the scientists wage rate is centralised at system level as in most European economies.

Suggested Citation

  • Andrea Borsato & Valentina Erasmo & André Lorentz, 2024. "The University and the Prince: Public funds shaping university trajectories," Working Papers of BETA 2024-51, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2024-51
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    File URL: http://beta.u-strasbg.fr/WP/2024/2024-51.pdf
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    References listed on IDEAS

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    1. Muscio, Alessandro & Quaglione, Davide & Vallanti, Giovanna, 2013. "Does government funding complement or substitute private research funding to universities?," Research Policy, Elsevier, vol. 42(1), pages 63-75.
    2. I. Etzo & R. Paci & C. Usala, 2024. "Brain gain vs. brain drain. The effects of universities' mobile students on territorial inequalities," Working Paper CRENoS 202411, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
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    Keywords

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    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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