FINANCING HIGHER-EDUCATION - A GENERAL EQUILIBRIUM PUBLIC CHOICE APPROACH

A public choice approach is used to examine the level of a tax-finance d grant chosen by a cohort, allowing for a wide range of interdependen cies, including the government's budget constraint. The existence of a n externality is necessary, but not sufficient, for support of a grant . It is shown that a majority voting equilibrium exists. Comparative s tatic analyses are carried out using a minimum of assumptions about th e structure of the model. An increase in government expenditure for no n-higher education purposes is associated with an increase in the pref erred grant, while an increase in private returns to education reduces the grant.