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A Dynamic Model of the Research University

30 Pages Posted: 11 Mar 2008 Last revised: 23 Dec 2011

Irina Khovanskaya

National Research University Higher School of Economics

Konstantin Sonin

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; Higher School of Economics; Centre for Economic Policy Research (CEPR)

Maria Yudkevich

National Research University Higher School of Economics

Date Written: October 2009

Abstract

We study hiring decisions made by competing universities in a simple dynamic framework, focusing on the structure of university finance. Universities with annual state-approved financing underinvest in high-quality faculty, while universities that receive a significant part of their annual income from (less volatile) returns on endowments hire fewer but better faculty and provide long-term contracts. If university financing is linked to the number of students, there is additional pressure to hire low-quality short-term staff. An increase in the university's budget might force the university to switch its priorities from 'research' to 'teaching' in equilibrium. We employ our model to discuss the necessity for state-financed endowments, and investigate the political economics of competition between universities, path-dependence in the development of the university system, and higher-education reform in emerging market economies

Keywords: economics of education, tenure, dynamic game

JEL Classification: I20, C73

Suggested Citation

Khovanskaya, Irina and Sonin, Konstantin and Yudkevich, Maria, A Dynamic Model of the Research University (October 2009). Available at SSRN: https://ssrn.com/abstract=1103291 or http://dx.doi.org/10.2139/ssrn.1103291

Irina Khovanskaya

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Konstantin Sonin (Contact Author)

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Higher School of Economics ( email )

20 Myasnitskaya street
Moscow, 119017
Russia

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Maria Yudkevich

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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