Interjurisdictional Competition for Higher Education and Firms

31 Pages Posted: 14 Jun 2006

See all articles by Marcel Gerard

Marcel Gerard

Facultes Universitaires Catholiques de Mons (FUCAM); CESifo (Center for Economic Studies and Ifo Institute)

Fernando Ruiz

Royal Military Academy

Date Written: May 2006

Abstract

In this paper we consider two regions competing for the larger part of the investment by a mobile firm whose decision is based on the quality of human capital in each region. This in turn depends on the initial skill level and the amount of higher education in the region, with a possible spillover to the other region. Therefore each region, through subsidies, tries to attract a larger part of the academic community. Moreover a central government or agency helps the poorer region by providing it with an extra budgetary allocation. The game is nested in a series of settings which are compared, especially from the point of view of their redistributive efficiency. From a policy point of view, the paper, in line with the subsidiarity principle, first provides an argument for allocating a significant amount of the competence in matters of human capital formation to the central authorities. It also sets forth difficulties which can arise from centralizing such an amount of competence and pleads for clear rules governing the federation, especially ruling out discretionary and opportunistic behavior of public authorities. Finally, it shows the importance of the central government being correctly informed, including being allowed to gather information by itself.

Keywords: higher education, interjurisdictional competition, fiscal federalism, public

JEL Classification: H41, H77, I20

Suggested Citation

Gerard, Marcel and Ruiz, Fernando, Interjurisdictional Competition for Higher Education and Firms (May 2006). CESifo Working Paper Series No. 1719. Available at SSRN: https://ssrn.com/abstract=908825

Marcel Gerard (Contact Author)

Facultes Universitaires Catholiques de Mons (FUCAM) ( email )

Chaussee de Binche, 151
Mons 7000
Belgium

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Fernando Ruiz

Royal Military Academy ( email )

Rue Hobbema 8
Brussels, 1000
Belgium

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