Financing Higher Education and Labor Mobility

34 Pages Posted: 31 Jul 2008

See all articles by Gabrielle Demange

Gabrielle Demange

Paris School of Economics (PSE); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Robert Fenge

CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Ifo Institute for Economic Research at the University of Munich

Silke Uebelmesser

Friedrich-Schiller-Universität Jena - School of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2008

Abstract

This paper analyzes how mobility of post-graduate skilled workers and students across different countries affects the quality level of higher education and the way education is financed. We start by examining a closed economy. In the presence of imperfect credit markets the education level with pure fee-financing is lower than the optimal level. If the credit market imperfections are not too large, a mix of tax- and fee-financing is optimal. The reason for this is that with pure fee-financing too few individuals decide to study. With mobility of skilled workers, both countries have an incentive to attract foreign skilled mobile workers as tax-payers while - at least partially - free-riding on the other country's provision of education. Both countries thus increase the tuition fee above the optimum and change the level of education correspondingly. If countries maintain the financing mix foreign skilled workers are attracted by suboptimal levels of educational quality. Allowing also for mobile students may intensify the upward race of fees. The case of free-riding on the education provided by other countries may be strengthened. However, countries may anticipate this race and abstain from engaging in fee competition in the first place.

Keywords: higher education, labor migration, tuition fees, taxes

JEL Classification: H77, I22

Suggested Citation

Demange, Gabrielle and Fenge, Robert and Uebelmesser, Silke, Financing Higher Education and Labor Mobility (July 2008). CESifo Working Paper Series No. 2362, Available at SSRN: https://ssrn.com/abstract=1190997 or http://dx.doi.org/10.2139/ssrn.1190997

Gabrielle Demange

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Robert Fenge (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschingerstr. 5
81679 Munich
Germany

Ifo Institute for Economic Research at the University of Munich ( email )

Poschingerstr. 5
Munich
Germany

Silke Uebelmesser

Friedrich-Schiller-Universität Jena - School of Economics and Business Administration ( email )

Carl-Zeiss-Str. 3
D-07743 Jena
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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