Voting on income-contingent loans for higher education

Elena Del Rey and Maria Racionero

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: We consider risk-averse individuals who differ in two characteristics - ability to benefit from education and inherited wealth - and analyze higher education participation under two alternative financing schemes - tax subsidy and (risk-sharing) income-contingent loans. With decreasing absolute risk aversion, wealthier individuals are more likely to undertake higher education despite the fact that, according to the stylized financing schemes we consider, individuals do not pay any up-front financial cost of education. We then determine which financing scheme arises when individuals are allowed to vote between schemes. We show that the degree of risk aversion plays a crucial role in determining which financing scheme obtains a majority, and that the composition of the support group for each financing scheme can be of two different types.

JEL-codes: D72 H52 I22 (search for similar items in EconPapers)
Pages: 26 Pages
Date: 2011-07
New Economics Papers: this item is included in nep-edu, nep-lab, nep-pol and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Voting On Income‐Contingent Loans For Higher Education (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2011-549

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