Guide to Reform of Higher Education: A European Perspective

Working Paper: CEPR ID: DP5327

Authors: Bas Jacobs; Frederick van der Ploeg

Abstract: Although there are exceptions, most European universities and institutions of higher education find it difficult to compete with the best universities in the Anglo-Saxon world. Despite the Bologna agreement and the ambitions of the Lisbon agenda, European universities are in need of fundamental reforms. We look at structural reforms of higher education and propose more effective use of public subsidies, more efficient modes of financing institutions of higher education, more diversity, competition and transparency, and larger private contributions through income-contingent student loans. In the process we discuss the nature of an institution of higher education, grade inflation, fair competition, private and social returns to education, income-contingent loans, student poverty and transparency. We sum up with seven recommendations for reform of higher education.

Keywords: Central Planning; Education Subsidies; Equity; Grade Inflation; Higher Education; Input Funding; Monopoly; Output Funding; Peer Review; Policy Reform; Selection; Student Loans; Transparency; Tuition Fees; Variety

JEL Codes: H2; H4; I2

Causal Claims

Cause	Effect
Government subsidies (H23)	Correct market failures (D47)
Government subsidies (H23)	Inequitable access to education (I24)
Government intervention (O25)	Perpetuation of inequalities (I24)
Income-contingent loans (H81)	Improve access to higher education (I24)
Income-contingent loans (H81)	Mitigate financial barriers (G29)
Current funding structures (G32)	Grade inflation (A23)
Current funding structures (G32)	Lack of competition among institutions (L13)
Lack of competition among institutions (L13)	Quality of education (I24)
Monopolistic practices (L12)	Fair competition (L13)
Reforms increasing transparency and competition (G18)	Educational outcomes (I21)