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Local university supply and distance: a welfare analysis with centralized and decentralized tuition fees

Carroni, Elias and Cesi, Berardino and Paolini, Dimitri (2016) Local university supply and distance: a welfare analysis with centralized and decentralized tuition fees. Italian Economic Journal, Vol. 2 (2), p. 239-252. ISSN 2199-322X. eISSN 2199-3238. Article.

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DOI: 10.1007/s40797-016-0033-z

Abstract

We consider a two-city model in which two university systems may occur: a centralized system in which a social planner sets the tuition fee and a decentralized system in which universities are free to set their own fees. Within these two systems we also analyze two further scenarios, one with only one university and another with one university in each city. Individuals with heterogeneous innate ability decide whether to go to university according to the average ability (peer group effect henceforth), a tuition fee and mobility costs, if any. In the centralized system, the welfare is maximized by opening two free-of-fees universities, one in each city. This maximizes university participation and eliminates the impediment of mobility costs. In the decentralized system, whether a single-university or a two-university system is more welfare enhancing depends on the mobility costs. When mobility costs are sufficiently low, then having only one university is welfare maximizing. When, instead, mobility costs are high, two universities result to be welfare enhancing.

Item Type:Article
ID Code:11448
Status:Published
Refereed:Yes
Uncontrolled Keywords:Peer grou, mobility cost, tuition fees
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/03 Scienza delle finanze
Area 13 - Scienze economiche e statistiche > SECS-P/01 Economia politica
Area 13 - Scienze economiche e statistiche > SECS-P/02 Politica economica
Area 13 - Scienze economiche e statistiche > SECS-P/06 Economia applicata
Divisions:002 Altri enti e centri di ricerca del Nord Sardegna > CRENoS-Centro Ricerche Economiche Nord Sud, Università di Cagliari e Università di Sassari
001 Università di Sassari > 01-a Nuovi Dipartimenti dal 2012 > Scienze economiche e aziendali
Publisher:Springer International
ISSN:2199-322X
eISSN:2199-3238
Deposited On:21 Oct 2016 10:08

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