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Political Economics of Higher Education Finance

Author

Listed:
  • 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' choices among them: a traditional subsidy scheme, a pure loan scheme, income contingent loans and graduate taxes. Using numerical simulations, we find that majorities for income contingent loans or graduate taxes become more likely as the income distribution gets more equal. We also perform sensitivity analyses with respect to risk aversion and the elasticity of substitution between high skilled and low skilled workers.

Suggested Citation

  • Rainald Borck & Martin Wimbersky, 2009. "Political Economics of Higher Education Finance," CESifo Working Paper Series 2829, CESifo.
    • Handle: RePEc:ces:ceswps:_2829
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    References listed on IDEAS

    as
    1. Dan Anderberg & Alessandro Balestrino, 2008. "The Political Economy of Post-Compulsory Education Policy with Endogenous Credit Constraints," CESifo Working Paper Series 2304, CESifo.
    2. William R. Johnson, 2006. "Are Public Subsidies to Higher Education Regressive?," Education Finance and Policy, MIT Press, vol. 1(3), pages 288-315, June.
    3. Del Rey, Elena & Racionero, María, 2010. "Financing schemes for higher education," European Journal of Political Economy, Elsevier, vol. 26(1), pages 104-113, March.
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    5. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, February.
    6. 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.
    7. Olivier de La Grandville & Rainer Klump, 2000. "Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions," American Economic Review, American Economic Association, vol. 90(1), pages 282-291, March.
    8. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
    9. Nicholas Barr, 2004. "Higher Education Funding," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 20(2), pages 264-283, Summer.
    10. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
    11. Erik Hanushek & F. Welch (ed.), 2006. "Handbook of the Economics of Education," Handbook of the Economics of Education, Elsevier, edition 1, volume 1, number 1, June.
    12. Erik Hanushek & F. Welch (ed.), 2006. "Handbook of the Economics of Education," Handbook of the Economics of Education, Elsevier, edition 1, volume 2, number 2, June.
    13. David Greenaway & Michelle Haynes, 2003. "Funding Higher Education in The UK: The Role of Fees and Loans," Economic Journal, Royal Economic Society, vol. 113(485), pages 150-166, February.
    14. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-318, July.
    15. Barr, Nicholas, 2004. "Higher education funding," LSE Research Online Documents on Economics 288, London School of Economics and Political Science, LSE Library.
    16. Raquel Fernandez & Richard Rogerson, 1995. "On the Political Economy of Education Subsidies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(2), pages 249-262.
    Full references (including those not matched with items on IDEAS)

    Citations

    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. 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.
    2. 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.
    3. 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).
    4. 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.
    5. 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.
    6. 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.
    7. 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).
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. 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.

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    More about this item

    Keywords

    voting; higher education; financing scheme;
    All these keywords.

    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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