Lancaster EPrints

Funding Higher Education and Wage Uncertainty: Income Contingent Loan versus Mortgage Loan

Migali, Giuseppe (2012) Funding Higher Education and Wage Uncertainty: Income Contingent Loan versus Mortgage Loan. Economics of Education Review, 31 (6). pp. 871-889. ISSN 0272-7757

[img]
Preview
PDF (Funding Higher Education and Wage Uncertainty: Income Contingent Loan versus Mortgage Loan) - Draft Version
Download (1133Kb) | Preview

    Abstract

    We propose a simple theoretical model which shows how the combined effect of wage uncertainty and risk aversion can modify the individual willingness to pay for a HE system financed by an ICL or a ML. We calibrate our model using real data from the 1970 British Cohort Survey together with the features of the English HE financing system. We allow for individual heterogeneity by considering different family backgrounds and occupations. We find that graduates from poor families, males and graduates working in the private sector are more willing to pay to switch to an ICL. Using the UK Labour Force Survey we evaluate the distributive effects of our model. We compute the repayment burdens and taxpayer subsidies for average, low and high earnings graduates. The results confirm the important insurance benefits of an ICL compared to a ML, with lower burdens and higher subsidies for poorer graduates.

    Item Type: Article
    Journal or Publication Title: Economics of Education Review
    Uncontrolled Keywords: Education choice ; Risk aversion ; Uncertainty
    Subjects: H Social Sciences > HB Economic Theory
    Departments: Lancaster University Management School > Economics
    ID Code: 55730
    Deposited By: ep_importer_pure
    Deposited On: 12 Jul 2012 16:20
    Refereed?: Yes
    Published?: Published
    Last Modified: 24 Jan 2014 05:28
    Identification Number:
    URI: http://eprints.lancs.ac.uk/id/eprint/55730

    Actions (login required)

    View Item