Higher Education Funding – A Portfolio of Loans • Job Talk

Speaker
Limor Hatsor
Date
28/10/2013 - 12:30 - 11:00Add To Calendar 2013-10-28 11:00:00 2013-10-28 12:30:00 Higher Education Funding – A Portfolio of Loans • Job Talk Abstract: The key contribution of this article is introducing the advantages of a portfolio into higher education funding in order to develop efficient funding schemes. In higher education funding, credit market loans (CMLs) lead to underinvestment while income-contingent student loans (ICLs) produce overinvestment. The research introduces a ‘portfolio regime’ (PR) that allows students to combine CMLs and ICLs. The model assumes that agents privately invest in higher education after receiving a noisy signal about their future incomes. The article compares a PR with a ‘competition regime’ (CR) a-la Eckwert and Zilcha that allows students to choose one type of loan but forbids a portfolio. The key insight is that implementation of a PR may improve the efficiency of investment in higher education and the social welfare. Nevertheless, the PR does not maximize the social welfare because of adverse selection into the ICLs program. אוניברסיטת בר-אילן - Department of Economics Economics.Dept@mail.biu.ac.il Asia/Jerusalem public
Affiliation
The Hebrew University
Abstract

Abstract: The key contribution of this article is introducing the advantages of a portfolio into higher education funding in order to develop efficient funding schemes. In higher education funding, credit market loans (CMLs) lead to underinvestment while income-contingent student loans (ICLs) produce overinvestment. The research introduces a ‘portfolio regime’ (PR) that allows students to combine CMLs and ICLs. The model assumes that agents privately invest in higher education after receiving a noisy signal about their future incomes. The article compares a PR with a ‘competition regime’ (CR) a-la Eckwert and Zilcha that allows students to choose one type of loan but forbids a portfolio. The key insight is that implementation of a PR may improve the efficiency of investment in higher education and the social welfare. Nevertheless, the PR does not maximize the social welfare because of adverse selection into the ICLs program.

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Last Updated Date : 30/11/2013