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Subsidies for Higher Education

George E. Johnson
Journal of Labor Economics
Vol. 2, No. 3 (Jul., 1984), pp. 303-318
Stable URL: http://www.jstor.org/stable/2534944
Page Count: 16
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Subsidies for Higher Education
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Abstract

Who should pay the resource costs of higher education? This paper investigates a simple model of the general equilibrium of the labor market with three skill levels. Those in the population with the lower level of intelligence and/or sophistication can only become low-skilled workers, but the brighter segment of the population can become either high- or medium-skilled workers. Given the tax structure, the welfare of each group is maximized by a unique subsidy rate on the cost of training high-skilled workers. Under several circumstances, the lower IQ group wants a higher subsidy rate than will the group that benefits directly from the training.

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