Political economics of higher education finance

Rainald Borck and Martin Wimbersky

Oxford Economic Papers, 2014, vol. 66, issue 1, 115-139

Abstract: We study voting over higher education finance in an economy with risk averse households who are heterogeneous in income. We compare four different systems and analyse voters' preferences among them: a traditional subsidy scheme, a pure loan scheme, income contingent loans and graduate taxes. Using numerical simulations, we find that the poor prefer the subsidy scheme over the other systems, even though they pay part of the taxes. We also find that majorities for income contingent loans or graduate taxes become more likely as risk aversion rises or the income distribution gets more equal. Copyright 2014 Oxford University Press 2012 All rights reserved, Oxford University Press.

Date: 2014
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Working Paper: Political Economics of Higher Education Finance (2009)
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