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Heterogeneous Individuals and the Optimal Level of Higher Education

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  • Ryuhei Okumura
  • Dapeng Cai

Abstract

We examine the effects of public funding on higher education within a game-theoretical framework, in which universities choose students according to their abilities to learn, whereas to widen the opportunity of receiving higher education, the tuition fees are partially financed by a graduate-tax subsidy system. We find that when individuals are impatient, partial public financing of higher education results in an overinvestment in higher education, which is, however, desirable in terms of improved access.

Suggested Citation

  • Ryuhei Okumura & Dapeng Cai, 2009. "Heterogeneous Individuals and the Optimal Level of Higher Education," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(1), pages 37-50, March.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200903)65:1_37:hiatol_2.0.tx_2-k
    DOI: 10.1628/001522108X444189
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    References listed on IDEAS

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    More about this item

    Keywords

    higher education; heterogeneous individuals; graduate tax;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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