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Student loans in a tiebout model of higher education

  • Schwager, Robert
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    A model is presented where universities competitively supply education to mobile students. Students are subject to a liquidity constraint so that tuition must be paid out of pre-university income. It is shown that student loans provided by home jurisdictions will ensure an efficient quality of higher education if loans do not contain any subsidy. If there is income-related debt relief, however, the equilibrium quality of education is inefficiently low. This is because students reduce their expected future income by attending a university offering low quality, and thereby reduce the amount of debt to be repaid.

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    File URL: http://econstor.eu/bitstream/10419/70209/1/71922165X.pdf
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    Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 137.

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    Date of creation: 2012
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    Handle: RePEc:zbw:cegedp:137
    Contact details of provider: Postal: Platz der Göttinger Sieben 3, 37073 Göttingen
    Web page: http://www.cege.wiso.uni-goettingen.de/

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    1. repec:dgr:uvatin:2005036 is not listed on IDEAS
    2. Wolfram F. Richter, 2009. "Taxing Education in Ramsey's Tradition," Ruhr Economic Papers 0140, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. Bruce Chapman & Kiatanantha Lounkaew, 2008. "Income Contingent Student Loans for Thailand : Alternatives Compared," EABER Working Papers 21950, East Asian Bureau of Economic Research.
    4. Erosa, Andres & Koreshkova, Tatyana, 2007. "Progressive taxation in a dynastic model of human capital," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 667-685, April.
    5. William Peterman, 2012. "The Effect of Endogenous Human Capital Accumulation on Optimal Taxation," 2012 Meeting Papers 204, Society for Economic Dynamics.
    6. Lydia Mechtenberg & Roland Strausz, 2008. "The Bologna process: how student mobility affects multi-cultural skills and educational quality," International Tax and Public Finance, Springer, vol. 15(2), pages 109-130, April.
    7. repec:dgr:uvatin:20050036 is not listed on IDEAS
    8. Bruce Chapman & Mathias Sinning, 2010. "Student Loan Reforms for German Higher Education: Financing Tuition Fees," CEPR Discussion Papers 646, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    9. Felicia Ionescu, 2011. "Risky Human Capital and Alternative Bankruptcy Regimes for Student Loans," Journal of Human Capital, University of Chicago Press, vol. 5(2), pages 153 - 206.
    10. Jesse Rothstein & Cecilia Elena Rouse, 2007. "Constrained After College: Student Loans and Early Career Occupational Choices," NBER Working Papers 13117, National Bureau of Economic Research, Inc.
    11. Bovenberg, A.L. & Jacobs, B., 2001. "Redistribution and Education Subsidies are Siamese Twins," Discussion Paper 2001-82, Tilburg University, Center for Economic Research.
    12. Panu Poutvaara & Vesa Kanniainen, 2000. "Why Invest in Your Neighbor? Social Contract on Educational Investment," International Tax and Public Finance, Springer, vol. 7(4), pages 547-562, August.
    13. Bas Jacobs & A. Bovenberg, 2010. "Human capital and optimal positive taxation of capital income," International Tax and Public Finance, Springer, vol. 17(5), pages 451-478, October.
    14. Chapman, B., 1996. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," CEPR Discussion Papers 350, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    15. Egger, Hartmut & Falkinger, Josef & Grossmann, Volker, 2007. "Brain Drain, Fiscal Competition, and Public Education Expenditure," IZA Discussion Papers 2747, Institute for the Study of Labor (IZA).
    16. Wolfram F. Richter, 2010. "Efficient Education Policy - A Second-Order Elasticity Rule," CESifo Working Paper Series 2969, CESifo Group Munich.
    17. ELIZABETH M. CAUCUTT & SELAHATTIN İMROHOROĞLU & KRISHNA B. KUMAR, 2006. "Does the Progressivity of Income Taxes Matter for Human Capital and Growth?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(1), pages 95-118, 01.
    18. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    19. Tangkitvanich, Somkiat & Manasboonphempool, Areeya, 2010. "Evaluating the Student Loan Fund of Thailand," Economics of Education Review, Elsevier, vol. 29(5), pages 710-721, October.
    20. Shen, Hua & Ziderman, Adrian, 2008. "Student Loans Repayment and Recovery: International Comparisons," IZA Discussion Papers 3588, Institute for the Study of Labor (IZA).
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