Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile

Posted: 16 Jul 2001

See all articles by Moshe Justman

Moshe Justman

Ben-Gurion University of the Negev - Department of Economics; University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Abstract

If higher education is publicly funded by local (sub-federal) jurisdictions, while skilled labor is heterogeneous in to wage differentials between jurisdictions, the spillovers that result give rise to a disparity between the centralized output-maximizing allocation of resources to higher education and decentralized equilibria. Generally, decentralization leads to under-provision, which can be offset by inter-jurisdictional subsidies based on gross migration flows. But the extent of the discrepancy depends on the local balance of political forces. Indeed, when the welfare of native-born emigrants is highly valued while new immigrants carry little political weight, over-provision in equilibrium is possible.

Keywords: Education, labor mobility, local public finance, fiscal federalism

Suggested Citation

Justman, Moshe and Thisse, Jacques-François, Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile. International Tax and Public Finance, Vol. 7, No. 3, 2000. Available at SSRN: https://ssrn.com/abstract=261969

Moshe Justman (Contact Author)

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+972 864 72292 (Phone)
+972 864 72941 (Fax)

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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