Private Investment in Higher Education: Comparing Alternative Funding Schemes

Abstract

Summary. This paper uses an overlapping generations framework to analyze the implications of different financing regimes in the education sector for human capital formation and economic welfare. Agents privately invest in education after they have received a noisy information signal about their abilities. The incentives of the individuals to invest in education are determined by the financing regime under which the economy operates. The paper analyzes and compares three financing regimes. Under each regime, the payback obligation of an educational loan is contingent, to some extent, on an individual's future income.

R&D subsidies and productivity in SMEs

“…Second, HE is financed via taxes on labour income. Thus, low-skilled labour that never enters HE (and high earners without HE) bears part of the costs related to HE (e.g., Eckwert and Zilcha, 2012). In effect, HE, which is financed by general taxation, will redistribute funds from the poor to the wealthy if there is too little progressivity in the tax system (e.g., GarciaPenalosa and Wälde, 2000).…”

Improvement in information and private investment in education

“…In recent papers Chapman (2005), Eckwert and Zilcha (2007), and Ionescu (2008) have analyzed the impact of various repayment schemes for student loan contracts. These studies find that the incentives to invest in education are affected substantially if individuals have the opportunity to switch from lock-in interest rates to an income contingent repayment plan.…”

“…Therefore, the precision of the information system and the specifics of the financing scheme for educational investment do not operate independently of one another as they impact the economy through a common channel (cf. Eckwert and Zilcha, 2007). This paper develops a theoretical framework that analyzes the role of the precision of the screening process for individual abilities for aggregate economic activity and economic welfare.…”

Simulations of Technology-induced and Crisis-led Stochastic and Chaotic Fluctuations in Higher Education Processes: A Model and a Case Study for Performance and Expected Employment

“…Such externalities are indicated in Hazlett (2000). The creation of such education-induced spillover benefits has a lot to do with the public and private investment in education, the public and private organization of education, and creative designs of optimal educational policies, which are explored, however partially, in many works including De Fraja (2000), Marginson (2007) and Eckwert and Zilcha (2012).…”

“…Among these are Barlas, Diker, and Polat (1997); Barlas and Diker (2000); Hazlett (2000); De Fraja (2002); Marginson (2007); Kara (2007;2013) ;Viaene and Zilcha (2009) ;Loomis and Rodrigues (2009) ;Eckwert and Zilcha (2012); Budge, Beale, and Lynas (2013); Velasco (2014); Aasen, Proitz, and Sandberg (2014) ;Schumacher, Dias, and Tebaldi (2014); and Kuziemko (2014).…”