Who Pays, Who Graduates? Funding Mechanisms and Other Drivers of Graduation in the European Union

Gintarė Židonė-Bylė () and Rytis Krušinskas
Additional contact information
Gintarė Židonė-Bylė: School of Economics and Business, Kaunas University of Technology, LT-44249 Kaunas, Lithuania
Rytis Krušinskas: School of Economics and Business, Kaunas University of Technology, LT-44249 Kaunas, Lithuania

Economies, 2025, vol. 13, issue 12, 1-19

Abstract: Higher education (HE) funding mechanisms in the European Union (EU) are undergoing substantial reform, with universities facing increasing pressure to improve performance outcomes under constrained public budgets. This study analyses how the design of HE funding mechanisms—specifically, the logic of resource allocation and the principles of performance evaluation, together with the volume of public investment, macroeconomic conditions, and demographic factors—affect graduation rates in the EU. The study uses panel data from 27 EU Member States for the period 2013–2023 and applies multiple regression models with one- to four-year lags to assess the delayed effects of funding and economic factors. The results showed that a larger share of young people in the population and public expenditure per student are positively and statistically significantly associated with higher graduation rates ( p < 0.01). Meanwhile, the overall level of funding (HE expenditure as a share of GDP) and performance-based funding (PBF) mechanisms are associated with lower graduation rates ( p < 0.01). GDP per capita has a negative effect ( p < 0.01), indicating that stronger labour market opportunities may reduce the motivation to complete studies. Youth unemployment and inflation proved to be statistically insignificant ( p > 0.05). The most substantial effect was found after two years, confirming the delayed but weakening impact of funding and macroeconomic factors on study graduation rates. The study extends previous work by integrating an analysis of funding design and time dimensions at the EU level. The results emphasise that it is not so much the amount of funding that is important for higher education outcomes, but instead how it is funded—therefore, targeted, student-oriented investments and long-term policy consistency are necessary to achieve higher graduation rates.

Keywords: graduation rates; higher education funding mechanisms; performance-based funding; public investment; education policy (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7099/13/12/364/pdf (application/pdf)
https://www.mdpi.com/2227-7099/13/12/364/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:13:y:2025:i:12:p:364-:d:1814944

Access Statistics for this article

Economies is currently edited by Ms. Hongyan Zhang

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().