The Political Economics of Higher Education Finance for Mobile Individuals

34 Pages Posted: 12 Jul 2012

See all articles by Rainald Borck

Rainald Borck

Humboldt University of Berlin - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Silke Uebelmesser

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

Martin Wimbersky

affiliation not provided to SSRN

Date Written: July 12, 2012

Abstract

We study voting over higher education finance in an economy with two regions and two separated labor markets. Households differ in their financial endowment and their children’s ability. Non-students are immobile. Students decide where to study; they return home after graduation with exogenous probability. The voters of the two regions decide on whether to subsidize higher education costs or whether to rely on tuition fees only. We find that in equilibrium, in both regions a majority votes for subsidies when the return probability is sufficiently small. When that probability is large, both regions opt for full tuition finance. Interestingly, the higher the return probability, the smaller are the equilibrium subsidy rates, but the larger are the numbers of exchange students.

Keywords: voting, higher education, financing scheme, mobility

JEL Classification: H520, H420, D720

Suggested Citation

Borck, Rainald and Uebelmesser, Silke and Wimbersky, Martin, The Political Economics of Higher Education Finance for Mobile Individuals (July 12, 2012). CESifo Working Paper Series No. 3877, Available at SSRN: https://ssrn.com/abstract=2104074 or http://dx.doi.org/10.2139/ssrn.2104074

Rainald Borck

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
D-10178 Berlin
Germany
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49-30-2093-5697 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Silke Uebelmesser (Contact Author)

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

Martin Wimbersky

affiliation not provided to SSRN ( email )

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