Premium
Incentive Effects in Higher Education: an Improved Funding Model for Universities
Author(s) -
Ainsworth Peter,
McKenzie Tom,
Stroyny Al
Publication year - 2016
Publication title -
economic affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.24
H-Index - 18
eISSN - 1468-0270
pISSN - 0265-0665
DOI - 10.1111/ecaf.12194
Subject(s) - incentive , graduation (instrument) , monopolistic competition , subject (documents) , competition (biology) , higher education , diversity (politics) , constraint (computer aided design) , budget constraint , public economics , distribution (mathematics) , economics , business , actuarial science , marketing , microeconomics , political science , economic growth , computer science , monopoly , engineering , mechanical engineering , ecology , mathematical analysis , mathematics , library science , law , biology
We examine the incentive effects of risk‐sharing between student and university in the English higher education system. The ‘graduate premium’ has been widely reported and has been used to justify rising higher education participation and increased individual or governmental expenditure. But this premium is simply the mean of a wide distribution, varying, inter alia, by subject, institution, year of graduation and individual. We assume that universities exist in a state of monopolistic competition and are subject to a budget constraint. Using US college data we find evidence suggesting that a funding model which incorporates risk‐sharing improves the efficiency of educational delivery while maintaining subject diversity and access.