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Private Investment in Higher Education: Comparing Alternative Funding Schemes
Author(s) -
ECKWERT BERNHARD,
ZILCHA ITZHAK
Publication year - 2012
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2010.00871.x
Subject(s) - investment (military) , incentive , economics , human capital , welfare , loan , obligation , finance , labour economics , public economics , business , economic growth , microeconomics , market economy , politics , political science , law
This paper uses an overlapping generations framework to analyse the implications of different financing regimes in the education sector for human capital formation and economic welfare. Agents privately invest in education after they have received a noisy information signal about their abilities. The incentives of individuals to invest in education are determined by the financing regime under which the economy operates. We analyse and compare three financing regimes. Under each regime, the payback obligation of an educational loan is contingent, to some extent, on an individual's future income.