Funding and Returns to Education

Abstract

The article deals with the various links between public or private funding and rates of return to education (RRE). In a first section the notion of human capital theory as well as the notions of private, social and fiscal RRE’s are defined. The second part is devoted to exploring the interaction between financing modes and RRE’s in a comparative-static as well as in a dynamic setting. In the third part estimates of private, fiscal and social RRE’s are presented for the case of men in Switzerland. On the basis of these results – with mixed public and private funding – the impact of a totally public and private funding of direct educational costs on RRE’s is simulated in a comparative-static manner. An estimate on dynamic reactions is made with the help of international empirical results. The article ends with conclusions on new directions to take to further investigate the relationship between financing modes and RRE’s.