Working Paper: CEPR ID: DP2090
Authors: Gianni De Fraja
Abstract: This paper investigates whether individual decisions lead to equality of opportunity in education, defined in the specific sense of irrelevance of parental income for university attendance. We show that, even if households can borrow in the capital market, the laissez-faire equilibrium exhibits an income bias, in the sense that individuals from high income households are more likely to attend university. We then study the welfare maximising policy of a utilitarian government. Its features are opposite to the free market equilibrium: with plausible assumptions, at low income levels, the tuition fee should be designed in such a way so as to create a bias in favour of low income households.
Keywords: education; university; student loans
JEL Codes: D63; I28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental income (D31) | University attendance (I23) |
| Innate ability (D29) | University attendance (I23) |
| Parental income (D31) | Risk aversion (D81) |
| Risk aversion (D81) | University attendance (I23) |
| Government policies (H59) | University attendance (I23) |
| Risk aversion (D81) | Equality of opportunity (I24) |
| Government policies (H59) | Parental income (D31) |