Resource title

Subsidizing enjoyable education

Resource image

image for OpenScout resource :: Subsidizing enjoyable education

Resource description

We explain why means-tested college tuition and means-tested government grants to college students can be efficient. The critical idea is that attending college is both an investment good and a consumption good. If education has a consumption benefit and tuition is uniform, the marginal rich student is less smart than some poor people who choose not to attend college, thus reducing the social returns to education and increasing the college?s cost of education. We find that competition among profit-maximizing colleges results in means-tested tuition. In addition, to maximize the social returns to education government should means-test grants. We thus provide a rationale for means-tested tuition and grants which relies neither on capital market imperfections nor on redistributive objectives.

Resource author

Robert A. J. Dur, Amihai Glazer

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19024

Resource license

Adapt according to the presented license agreement and reference the original author.