The public role in private post-secondary education : a review of issues and options

This paper considers whether private educational institutions can play an expanded role in helping attain society's objective with respect to the efficiency and equity of the system of post-secondary education. The authors focus on how public subsidies can be used to meet the social objectives of private education. In recent years there hasbeen increasing evidence of a growing problem of graduate unemployment. Higher education has also been perceived as a socially unproductive but privately profitable screening device. The paper argues that public subsidies should be targeted toward disciplines that have high social returns. If subsidies are to be used to make private higher education more accessible to the poor, a strong case can be made for scholarships and/or loan guarantees. The paper also discusses ways to promote quality among private institutions. The most efficient way to make schools better is to design an incentive system that rewards institutions on the basis of how their graduates perform -- although this might favor students from high-income families. In addition, inappropriate labor market legislation and government behavior as an employer may have contributed to problems of graduate unemployment, credentialism, and a swollen bureaucracy in some countries.