Peter Michaelis
Education, Research and the Impact of Tuition
Fees - A Simple Model of the University
Abstract:
The present
paper analyses
the behaviour of a university within a neoclassical equilibrium
framework.
Demand for enrolments is traced back to the decision of potential
students
which aim at maximizing expected lifetime income. Here, the key factors
are the
students’ preferences and abilities, the quality of education offered
by the university
and several external determinants like, e.g., tuition fees and
differences in income
between graduates and non-graduates. In turn, the behaviour of the
university
in terms of educational efforts and the strength of academic standards
depends
on the demand for enrolments, on financial resources available and on
the
specific objectives pursued by the university. The main emphasis is on
the
implications of different funding mechanism (governmental grants vs.
tuition
fees) in combination with different objectives pursued (maximizing
enrolments vs.
maximizing prestige via research output). It is shown that for given
financial
resources a university that aims at maximizing prestige always provides
only a
lower quality of education for a smaller number of students compared to
a university
that aims at maximizing enrolments. Moreover, the effects caused by
changes in governmental
grants or tuition fees are quite different depending on the
university’s objectives.
Yet, there is also one common feature: Irrespective of which utility
function
is maximized, partially substituting governmental grants by tuition
fees would
change neither educational efforts nor academic standards, but it would
inevitably lead to decreasing enrolments. As a positive side-effect,
however,
the average ability of the remaining population of students would
increase.
JEL: A2
Paper:
Paper available as pdf-file.
Beitrag Nr. 265, Volkswirtschaftliche Diskussionsreihe, Institut
für Volkswirtschaftslehre der Universität Augsburg
Contact:
Peter
Michaelis, University of Augsburg, Department of Economics, D-86135
Augsburg, Germany, phone +49-821-598-4057, fax +49-821-598-4217,
Email: peter.michaelis@wiwi.uni-augsburg.de
v.
K., 25.08.2004