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Political economics of higher education finance

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  • Rainald Borck
  • Martin Wimbersky

Abstract

We study voting over higher education finance in an economy with risk averse households who are heterogeneous in income. We compare four different systems and analyse voters' preferences among them: a traditional subsidy scheme, a pure loan scheme, income contingent loans and graduate taxes. Using numerical simulations, we find that the poor prefer the subsidy scheme over the other systems, even though they pay part of the taxes. We also find that majorities for income contingent loans or graduate taxes become more likely as risk aversion rises or the income distribution gets more equal. Copyright 2014 Oxford University Press 2012 All rights reserved, Oxford University Press.

Suggested Citation

  • Rainald Borck & Martin Wimbersky, 2014. "Political economics of higher education finance," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 115-139, January.
    • Handle: RePEc:oup:oxecpp:v:66:y:2014:i:1:p:115-139
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    References listed on IDEAS

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    1. William R. Johnson, 2006. "Are Public Subsidies to Higher Education Regressive?," Education Finance and Policy, MIT Press, vol. 1(3), pages 288-315, June.
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    8. Barr, Nicholas, 2004. "Higher education funding," LSE Research Online Documents on Economics 288, London School of Economics and Political Science, LSE Library.
    9. Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 2, chapter 25, pages 1435-1503, Elsevier.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Graduate taxes, not student loans, for Ireland
      by brianmlucey in Brian M. Lucey on 2016-08-01 10:33:23

    Citations

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    Cited by:

    1. Lergetporer, Philipp & Woessmann, Ludger, 2019. "The Political Economy of Higher Education Finance: How Information and Design Affect Public Preferences for Tuition," Rationality and Competition Discussion Paper Series 145, CRC TRR 190 Rationality and Competition.
    2. Philippe De Donder & Francisco Martinez-Mora, 2015. "On the Political Economy of University Admission Standards," Discussion Papers in Economics 15/11, Division of Economics, School of Business, University of Leicester.
    3. Rainald Borck & Silke Uebelmesser & Martin Wimbersky, 2015. "The Political Economics of Higher-Education Finance for Mobile Individuals," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(1), pages 82-105, March.
    4. Lergetporer, P & Woessmann, L, 2022. "Income Contingency and the Electorates Support for Tuition," CAGE Online Working Paper Series 606, Competitive Advantage in the Global Economy (CAGE).
    5. Maria Racionero & Elena Del Rey, 2012. "Choosing the type of income-contingent loan: risk-sharing versus risk-pooling," CEPR Discussion Papers 671, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    6. Dayong Nie & Elena Panfilova & Vadim Samusenkov & Alexey Mikhaylov, 2020. "E-Learning Financing Models in Russia for Sustainable Development," Sustainability, MDPI, vol. 12(11), pages 1-14, May.
    7. De Donder, Philippe & Martinez-Mora, Francisco, 2017. "The political economy of higher education admission standards and participation gap," Journal of Public Economics, Elsevier, vol. 154(C), pages 1-9.
    8. Elena Del Rey & María Racionero, 2012. "Voting On Income‐Contingent Loans For Higher Education," The Economic Record, The Economic Society of Australia, vol. 88(s1), pages 38-50, June.
    9. Jennifer A. Delaney & Dhammika Dharmapala, 2017. "“Pay It Forward” And Higher Education Subsidies: A Median Voter Model," Contemporary Economic Policy, Western Economic Association International, vol. 35(4), pages 615-629, October.
    10. Juan A. Correa & Yijia Lu & Francisco Parro & Mauricio Villena, 2020. "Why is free education so popular? A political economy explanation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 973-991, August.
    11. Lergetporer, Philipp & Woessmann, Ludger, 2023. "Earnings information and public preferences for university tuition: Evidence from representative experiments," Journal of Public Economics, Elsevier, vol. 226(C).
    12. Maria Racionero & Elena Del Rey, 2012. "Choosing the type of income-contingent loan: risk-sharing versus risk-pooling," CEPR Discussion Papers 671, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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