Local public funding of higher education when skilled labor is imperfectlymobile

If higher education is publicly funded by local (sub-federal) jurisdictions , while skilled labor is heterogeneous in responding to wage differentials between jurisdictions, the spillovers that result give rise to a disparity between the centralized output-maximizing allocation of resources to higher education and decentralized equilibria. Generally, decentralization leads to under-provision, which can be offset by inter-jurisdictional subsidies b ased on gross migration flows. But the extent of the discrepancy depends on the local balance of political forces. Indeed, when the welfare of native- born emigrants is highly valued while new immigrants carry little political weight, over-provision in equilibrium is possible.