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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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    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
    Date of revision:
    Handle: RePEc:zbw:cegedp:137
    Contact details of provider: Postal: Platz der Göttinger Sieben 3, 37073 Göttingen
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    1. 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.
    2. 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).
    3. 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.
    4. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 149-163, February.
    5. Richter, Wolfram F., 2009. "Taxing education in Ramsey's tradition," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1254-1260, December.
    6. 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.
    7. Bovenberg, A Lans & Jacobs, Bas, 2005. "Human Capital and Optimal Positive Taxation of Capital Income," CEPR Discussion Papers 5047, C.E.P.R. Discussion Papers.
    8. Tangkitvanich, Somkiat & Manasboonphempool, Areeya, 2010. "Evaluating the Student Loan Fund of Thailand," Economics of Education Review, Elsevier, vol. 29(5), pages 710-721, October.
    9. Bovenberg, A.L. & Jacobs, B., 2001. "Redistribution and Education Subsidies are Siamese Twins," Discussion Paper 2001-82, Tilburg University, Center for Economic Research.
    10. 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.
    11. Poutvaara, Panu & Kanniainen, Vesa, 2000. "Why invest in your neighbor? Social contract on educational investment," Munich Reprints in Economics 19797, University of Munich, Department of Economics.
    12. William Peterman, 2012. "The Effect of Endogenous Human Capital Accumulation on Optimal Taxation," 2012 Meeting Papers 204, Society for Economic Dynamics.
    13. Bruce Chapman & Kiatanantha Lounkaew, 2008. "Income Contingent Student Loans for Thailand : Alternatives Compared," EABER Working Papers 21950, East Asian Bureau of Economic Research.
    14. repec:rwi:repape:0244 is not listed on IDEAS
    15. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
    16. 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.
    17. Shen, Hua & Ziderman, Adrian, 2008. "Student Loans Repayment and Recovery: International Comparisons," IZA Discussion Papers 3588, Institute for the Study of Labor (IZA).
    18. Wolfram F. Richter, 2011. "Efficient Education Policy - A Second-Order Elasticity Rule," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 67(1), pages 1-7, March.
    19. repec:rwi:repape:0140 is not listed on IDEAS
    20. 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.
    21. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
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