Public Funding of Higher Education: Who Gains, Who Loses?

Abstract

This paper analyses the effects of public funding of higher education on the welfare of the different agents. It takes into account the hierarchical nature of the educational system and also the fact that parents always have the possibility to complement basic public education with private expenditures in individual tutoring. It is obtained that although public funding implies a larger access to higher education it is always the case that some of the agents that gain access lose in welfare terms. Moreover, it is shown that the marginal agent to access university would always prefer a pure private funding system. Thus, when studying the effects of public funding of higher education, we can not identify gaining access to University with an increase in welfare. Finally, I consider a funding system where only those that send their offspring to university support the funding of higher education.