Externalities and subsidization of higher education
Higher education is subsidized worldwide, although with pronounced differences in levels of subsidization. While public funds account for about 90% of universities budgets in Scandinavian countries, the share of public funds in Great Britain and the US is less that 30%. Subsidization is typically justified by two arguments: It is necessary to enable children from poorer family backgrounds to join universities. The other argument holds that higher education is accompanied by positive externalities. Without subsidization, so the story reads, there would be an underinvestment in higher education. This paper shortly reviews theoretical arguments as well as empirical evidence on externalities. It is found that evidence on positive externalities is quite limited. What is more, evidence on negative externalities of higher education has been mainly ignored so far. If potential losses due to negative externalities are taken into account, there may be much more reason to suppress higher education than there is reason to subsidize it. If subsidization is reasonable at all, it will be reasonable in special cases only. We present a simple model of optimal subsidization and evaluate existing subsidization regimes in the US, Australia and Germany. We demonstrate that any of these regimes has severe shortcomings even if positive externalities are assumed to exist. While the Australian regime of income contingent loans is relatively best, it still offers many opportunities for improvement. We offer some guidance on potential improvements.
|Date of creation:||2013|
|Contact details of provider:|| Web page: http://www.socialpolitik.org/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Antonio Ciccone & Giovanni Peri, 2006.
"Identifying Human-Capital Externalities: Theory with Applications,"
Review of Economic Studies,
Oxford University Press, vol. 73(2), pages 381-412.
- Antonio Ciccone & Giovanni Peri, 2003. "Identifying Human Capital Externalities: Theory with Applications," Working Papers 6, Barcelona Graduate School of Economics.
- Ciccone Antonio & Peri Giovanni, 2007. "Identifying Human Capital Externalities. Theory with Applications," Working Papers 201098, Fundacion BBVA / BBVA Foundation.
- Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
- Alan B. Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section..
- Alan B. Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," NBER Working Papers 7591, National Bureau of Economic Research, Inc.
- Sveinbjörn Blöndal & Simon Field & Nathalie Girouard, 2003. "Investment in human capital through upper-secondary and tertiary education," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 41-89.
- Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
- Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
- Daniel Cohen & Marcelo Soto, 2007. "Growth and human capital: good data, good results," Journal of Economic Growth, Springer, vol. 12(1), pages 51-76, March.
- Cohen, Daniel & Soto, Marcelo, 2001. "Growth and Human Capital: Good Data, Good Results," CEPR Discussion Papers 3025, C.E.P.R. Discussion Papers.
- Daniel Cohen & Marcelo Soto, 2001. "Growth and Human Capital: Good Data, Good Results," OECD Development Centre Working Papers 179, OECD Publishing.
- Chapman, Bruce & Ryan, Chris, 2005. "The access implications of income-contingent charges for higher education: lessons from Australia," Economics of Education Review, Elsevier, vol. 24(5), pages 491-512, October.
- Bruce Chapman & Chris Ryan, 2003. "The Access Implications of Income Contingent Charges for Higher Education: Lessons from Australia," CEPR Discussion Papers 463, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Lance Lochner, 2004. "Education, Work, And Crime: A Human Capital Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 811-843, 08.
- Lance Lochner, 2004. "Education, Work, and Crime: A Human Capital Approach," NBER Working Papers 10478, National Bureau of Economic Research, Inc.
- Gary S. Becker, 1994. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition)," NBER Books, National Bureau of Economic Research, Inc, number beck94-1.
- Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
- Jerik Hanushek & Dennis Kimko, 2006. "Schooling, Labor-force Quality, and the Growth of Nations," Educational Studies, Higher School of Economics, issue 1, pages 154-193.
- Dennis D. Kimko & Eric A. Hanushek, 2000. "Schooling, Labor-Force Quality, and the Growth of Nations," American Economic Review, American Economic Association, vol. 90(5), pages 1184-1208, December.
- Daron Acemoglu & Joshua Angrist, 1999. "How Large are the Social Returns to Education? Evidence from Compulsory Schooling Laws," NBER Working Papers 7444, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Joshua Angrist, 1999. "How Large are the Social Returns to Education? Evidence from Compulsory Schooling Laws," Working papers 99-30, Massachusetts Institute of Technology (MIT), Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc13:79993. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.