Why should the Czech Republic reform its current policy of financing higher education?

Abstract

The Czech Republic has traditionally financed higher education out of general taxation and in the form of per capita funding. This system has led to inef- ficient allocation of funds, long-term underfunding and decreasing quality of education. We present three alternative financing schemes which rely on larger contribution from students: pure student loan, risk-sharing income-contingent loan and risk-pooling income-contingent loan. By using a theoretical model and calibrating it to the Czech reality, we show that financing schemes have significant impact on higher education participation and the quality of accepted students. While pure loan and risk-pooling induce optimal participation, in- ternational experience suggests that risk-sharing is the more feasible option. Keywords Financing schemes for higher education, tax-subsidy funding, income-contingent loans, higher education participation Author's e-mail kadlecova.paja@gmail.com Supervisor's e-mail gebicka@fsv.cuni.cz Abstrakt Česká republika financuje vysoké školství tradičně ze státního rozpočtu a ve formě dotací na studenta. Tento systém způsobil, že zdroje nejsou alokovány efektivně, vzdělání je dlouhodobě podfinancováno a jeho kvalita se snižuje. Práce se věnuje třem alternativním způsobům financování: prosté...

The Czech Republic has traditionally financed higher education out of general taxation and in the form of per capita funding. This system has led to inef- ficient allocation of funds, long-term underfunding and decreasing quality of education. We present three alternative financing schemes which rely on larger contribution from students: pure student loan, risk-sharing income-contingent loan and risk-pooling income-contingent loan. By using a theoretical model and calibrating it to the Czech reality, we show that financing schemes have significant impact on higher education participation and the quality of accepted students. While pure loan and risk-pooling induce optimal participation, in- ternational experience suggests that risk-sharing is the more feasible option. Keywords Financing schemes for higher education, tax-subsidy funding, income-contingent loans, higher education participation Author's e-mail kadlecova.paja@gmail.com Supervisor's e-mail gebicka@fsv.cuni.cz Abstrakt Česká republika financuje vysoké školství tradičně ze státního rozpočtu a ve formě dotací na studenta. Tento systém způsobil, že zdroje nejsou alokovány efektivně, vzdělání je dlouhodobě podfinancováno a jeho kvalita se snižuje. Práce se věnuje třem alternativním způsobům financování: prosté...