22 Pages Posted: 27 Apr 2011
Date Written: April 27, 2011
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 and overinvestment in research. This inefficiency can be corrected if a transnational transfer for mobile students is implemented. With endogenous income taxation, we show that the strength of fiscal competition increases with human capital production. Consequently, supranational policies aimed at promoting teaching quality reduce tax revenues at the expense of research.
Keywords: student mobility, worker mobility, university competition, government competition
JEL Classification: H770, I220, I230, I280
Suggested Citation: Suggested Citation
Delpierre, Matthieu and Verheyden, Bertrand, Student and Worker Mobility Under University and Government Competition (April 27, 2011). CESifo Working Paper Series No. 3415. Available at SSRN: https://ssrn.com/abstract=1824175