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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. Chapman, Bruce, 1997. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," Economic Journal, Royal Economic Society, vol. 107(442), pages 738-51, May.
    2. Bruce Chapman & Kiatanantha Lounkaew, 2008. "Income Contingent Student Loans for Thailand : Alternatives Compared," EABER Working Papers 21950, East Asian Bureau of Economic Research.
    3. Shen, Hua & Ziderman, Adrian, 2008. "Student Loans Repayment and Recovery: International Comparisons," IZA Discussion Papers 3588, Institute for the Study of Labor (IZA).
    4. Wolfram F. Richter, 2010. "Efficient Education Policy - A Second-Order Elasticity Rule," CESifo Working Paper Series 2969, CESifo Group Munich.
    5. Bovenberg, A Lans & Jacobs, Bas, 2001. "Redistribution and Education Subsidies are Siamese Twins," CEPR Discussion Papers 3099, C.E.P.R. Discussion Papers.
    6. Lydia Mechtenberg & Roland Strausz, . "The Bologna Process: How student mobility affects multi-cultural skills and educational quality," Papers 030, Departmental Working Papers.
    7. 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.
    8. repec:rwi:repape:0244 is not listed on IDEAS
    9. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
    10. 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.
    11. Tangkitvanich, Somkiat & Manasboonphempool, Areeya, 2010. "Evaluating the Student Loan Fund of Thailand," Economics of Education Review, Elsevier, vol. 29(5), pages 710-721, October.
    12. Richter, Wolfram F., 2009. "Taxing education in Ramsey's tradition," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1254-1260, December.
    13. 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.
    14. 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.
    15. 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.
    16. 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.
    17. 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).
    18. William B. Peterman, 2012. "The effect of endogenous human capital accumulation on optimal taxation," Finance and Economics Discussion Series 2012-03, Board of Governors of the Federal Reserve System (U.S.).
    19. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    20. Chapman, Bruce & Sinning, Mathias, 2011. "Student Loan Reforms for German Higher Education: Financing Tuition Fees," Ruhr Economic Papers 244, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    21. 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.
    22. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
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