Student and worker mobility under university and government competition
(2014) Journal of Public Economics — Vol. 110, p. 26-41 (2014)
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- Abstract
- 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.
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Delpierre, M., & Verheyden, B. (2014). Student and worker mobility under university and government competition. Journal of Public Economics, 110, 26-41. https://doi.org/10.1016/j.jpubeco.2013.11.012 (Original work published 2014)