Arts vs engineering: Choosing consumption of and investment in education

Richard Romano and Alessandro Tampieri

Research in Economics, 2016, vol. 70, issue 3, 493-510

Abstract: We develop a model in which students choose their college coursework based on both investment and consumption incentives. These education decisions are socially inefficient. This result is driven by the fact that students do not consider an externality in the working environment of acquiring education for investment purposes. Regulated tuition fees have more potential to induce socially optimal outcomes than regulating levels of education given information constraints. The model can help explain several empirical regularities in the education literature.

Keywords: Education consumption; Education investment; Tuition fees; Externality (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:70:y:2016:i:3:p:493-510

DOI: 10.1016/j.rie.2016.05.003

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