TY - JOUR
T1 - Student and worker mobility under university and government competition.
AU - Delpierre, Matthieu
AU - Verheyden, Bertrand
PY - 2014/1/1
Y1 - 2014/1/1
N2 - We provide a normative analysis of endogenous student and worker mobility in the presence of diverging interests between universities and governments. Student mobility generates a university competition effect which induces them to overinvest in education, whereas worker mobility generates a free-rider effect for governments, who are not willing to subsidize the education of agents who will work abroad. At equilibrium, the free-rider effect always dominates the competition effect, resulting in underinvestment in human capital. This inefficiency can be corrected under exogenous university budgets if a transnational transfer for mobile students is implemented. With endogenous income taxation, under the non-cooperative equilibrium between governments, the combination of the free-rider effect and fiscal competition leads to underinvestment in both teaching and research. Furthermore, the transnational transfer no longer restores efficiency. Instead, it can reinforce fiscal competition and imposes a tradeoff between research and human capital.
AB - We provide a normative analysis of endogenous student and worker mobility in the presence of diverging interests between universities and governments. Student mobility generates a university competition effect which induces them to overinvest in education, whereas worker mobility generates a free-rider effect for governments, who are not willing to subsidize the education of agents who will work abroad. At equilibrium, the free-rider effect always dominates the competition effect, resulting in underinvestment in human capital. This inefficiency can be corrected under exogenous university budgets if a transnational transfer for mobile students is implemented. With endogenous income taxation, under the non-cooperative equilibrium between governments, the combination of the free-rider effect and fiscal competition leads to underinvestment in both teaching and research. Furthermore, the transnational transfer no longer restores efficiency. Instead, it can reinforce fiscal competition and imposes a tradeoff between research and human capital.
KW - Fiscal competition
KW - Student mobility
KW - University competition
KW - Worker mobility
U2 - 10.1016/j.jpubeco.2013.11.012
DO - 10.1016/j.jpubeco.2013.11.012
M3 - Article
SN - 0047-2727
VL - 110
SP - 26
EP - 41
JO - Journal of Public Economics
JF - Journal of Public Economics
ER -