Student and Worker Mobility Under University and Government Competition

22 Pages Posted: 27 Apr 2011  

Matthieu Delpierre

Catholic University of Louvain (UCL) - ECRU

Bertrand Verheyden

affiliation not provided to SSRN

Date Written: April 27, 2011

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 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

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

Matthieu Delpierre

Catholic University of Louvain (UCL) - ECRU ( email )

Belgium

Bertrand Verheyden (Contact Author)

affiliation not provided to SSRN ( email )

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