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International Handbook on the Economics of Education

Edited by Geraint Johnes and Jill Johnes

This major Handbook comprehensively surveys the rapidly growing field of the economics of education. It is unique in that it comprises original contributions on an exceptional range of topics from a review of human capital, signalling and screening models, to consideration of issues such as educational externalities and economic growth, funding models, determinants of educational success, the educational production function, educational standards and efficiency measurement. Labour market issues such as the market for teachers and the transition of students from school to work are also explored.
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Chapter 8: Funding Higher Education

David Greenaway and Michelle Haynes


David Greenaway and Michelle Haynes 1 Introduction Over the last 20 years of the 20th century there was a remarkable increase in participation in higher education in a number of OECD and non-OECD countries (for details, see OECD, 2002). In the case of the former, this was partly demand-driven, with key factors being increased female participation and increasing private rates of return to a first degree. In some countries, it was also supply-driven, with policy initiatives to increase the number of universities and increase publicly funded places to support development of the ‘knowledge-based economy’. One of the key debates triggered by increased participation is how to pay for it.1 Governments have become less capable of financing higher education expansion owing to increased competition for public funds. This has triggered two questions: should the beneficiaries of higher education make a larger contribution to the costs of provision and, if the answer to this question is ‘yes’, how and when should they make that contribution? In section 2 we review the broad patterns in participation and higher education funding across OECD countries. Any argument that beneficiaries should make a greater contribution to tuition costs relies on a demonstration that they would be better off than otherwise as a result of having experienced higher education. There is extensive evidence on this topic which we review briefly in section 3. Section 4 assesses a range of funding options for higher education. Section 5 examines some of the recent innovations by OECD...

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