Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile

Moshe Justman and Jacques Thisse

International Tax and Public Finance, 2000, vol. 7, issue 3, 247-258

Abstract: If higher education is publicly funded by local (sub-federal) jurisdictions, while skilled labor is heterogeneous in responding to wage differentials between jurisdictions, the spillovers that result give rise to a disparity between the centralized output-maximizing allocation of resources to higher education and decentralized equilibria. Generally, decentralization leads to under-provision, which can be offset by inter-jurisdictional subsidies based on gross migration flows. But the extent of the discrepancy depends on the local balance of political forces. Indeed, when the welfare of native-born emigrants is highly valued while new immigrants carry little political weight, over-provision in equilibrium is possible. Copyright Kluwer Academic Publishers 2000

Keywords: education; labor mobility; local public finance; fiscal federalism (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1023/A:1008705528650

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