The development of higher education in Europe as a “coordination game”

José Pontes and Ana Paula Buhse

No 2019/0105, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paper tries to explain differences in high education growth across European countries by using a coordinantion game (Stag Hunt) played by n candidates to college education. The payoff of enrolling in the university is positive only if there is "unanimity" i.e. if all candidates engage in higher education, being zero otherwise. This coordination requirement follows from the specialized nature of skills acquired through higher education, which can only be made profitable if each graduate is matched with graduate complementary specialists. This game has two strict Nash equilibria, where either all youngsters enter the university or none does. We show that the assessment of the factors that explain the differential growth of universities across countries is related with alternative ways of selecting a Nash equilibrium in the coordination game. By using empirical data, we can conclude that demographic trends and a cumulative causation factor play a major role in tertiary education growth, while the "wage premium" associated with college attendance also matters but is relatively secondary. "Tuition fees" and other direct financial costs do not appear to be a significant cause or hindrance of university development.

Keywords: Higher Education; Regional Development; Coordination Games; Risk Dominance. (search for similar items in EconPapers)
JEL-codes: C72 I20 O12 R11 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-edu, nep-eur, nep-gth and nep-lab
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp01052019

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