Berthold U. Wigger

Risk, Resources, and Education: Public Versus Private Financing of Higher Education

The paper develops a public education scheme that takes aspects of uncertainty in private educational investments explicitly into account. The social merits of public education schemes are related to the lack of markets in which students can insure against educational risks. A case is made for tuition fees that depend on expected returns of investments in education. The consideration of uncertainty provides a neglected link between educational choice, resource endowment, and productivity growth, which may serve to redefine the public role of education financing.

Growth and social security: the role of human capital

This paper studies the growth and efficiency effects of pay-as-you-go financed social security when human capital is the engine of growth. Employing a variant of the Lucas (1988) model with overlapping generations, it is shown that a properly designed unfunded social security system leads to higher output growth than a fully funded one. Furthermore, the economy with unfunded social security is efficient while the other one is not. These results stand in sharp contrast to those that obtain in models where economic growth is driven by physical capital accumulation.

Public pensions and economic growth

1. Introduction.- 2. Public Pensions and Economic Growth: The Basic Framework.- 2.1. The Analytical Elements.- 2.1.1. The Individuals.- 2.1.2. The Firms.- 2.1.3. The Public Pension Program.- 2.1.4. The Competitive Equilibrium.- 2.2. Productivity Growth.- 2.3. Allocative Efficiency.- 2.4. Public Pension Reform.- Appendix 2.- 3. The Allocative Role of Intergenerational Transfers in Endogenous Growth Economies.- 3.1. Investment Externalities, Intergenerational Transfers, and Pareto-improvements.- 3.1.1. A Subsidy to Private Savings.- 3.1.2. A Pareto-Improving Policy.- 3.2. The Length of the Working Life.- 3.2.1. A Two-Period Model without Retirement.- 3.2.2. A Three-Period Model with Retirement.- 3.3. Endogenous Innovation.- 3.4. Human Capital Formation.- 3.4.1. Externalities from Human Capital Formation.- 3.4.2. An Optimal Public Pension Scheme.- Appendix 3.- 4. Public versus Private Intergenerational Transfers.- 4.1. Dynastic Altruism.- 4.2. Gifts, Bequests, and Growth.- 4.3. When Are Private Intergenerational Transfers Operative?.- 4.4. Old-Age Security and Neutrality.- 4.5. Legislating Public Pensions (I).- 4.5.1. The Political Equilibrium.- 4.5.2. An Intergenerational Conflict.- 4.5.3. The Role of Population Growth.- 4.5.4. Concluding Remarks.- Appendix 4.- 5. The Family as an Old-age Security Device.- 5.1. A Twofold Fertility Motive.- 5.2. The Interplay between Productivity Growth and Fertility.- 5.2.1. Operative Intrafamily Transfers.- 5.2.2. Productivity Growth.- 5.2.3. Fertility.- 5.2.4. The Economys Growth Factor.- 5.3. Legislating Public Pensions (II).- 5.3.1. The Political Equilibrium.- 5.3.2. Reduced Joy of Having Children.- 5.3.3. A Numerical Example.- Appendix 5.- 6. Summary.- List of Symbols.- References.- Author Index.

Higher Education Financing and Income Redistribution

This paper considers an optimal income tax cum higher education policy. It shows that in the presence of an optimal income tax system higher education should be taxed rather than subsidized. Furthermore, income taxes should become less progressive when an optimal higher education policy is introduced.

Gifts, Bequests, and Growth

A familiar result in the theory of private intergenerational transfers is that competitive equilibria with gifts from children to their parents are dynamically inefficient whereas they are dynamically efficient with bequests from parents to their children. This note demonstrates that if growth is endogenous, both gift and bequest economies are dynamically efficient, but gift economies grow more rapidly.

Do Consumers Purchase Too Much Health Insurance? The Role of Market Power in Health-Care Markets

Several authors have suggested that consumers purchase too much health insurance in private markets. We readdress this issue within a model that combines excess health-care demand due to health insurance with market power due to monopolistic production of health-care services. We evaluate the market equilibrium in terms of consumer welfare and social welfare. The consumer welfare criterion suggests that in the market equilibrium consumers in fact purchase too much health insurance coverage. The social welfare criterion, in contrast, suggests that because profits of the health-care industry are properly accounted for, consumers should purchase more insurance coverage than they choose to do in the market equilibrium.

A Note on Public Debt, Tax-Exempt Bonds, and Ponzi Games

By issuing tax-exempt bonds, the government can incur debt and never pay back any principal or interest, even if the economy without public debt evolves on a dynamically efficient growth path. The welfare effects of such a Ponzi type borrowing scheme are mixed. The current young will unambiguously benefit.Depending on preferences and the aggregate technology, also a finite number of subsequent generations may benefit. The welfare of all generations thereafter, however, will be lower than in the economy without public debt.

Productivity Growth and the Political Economy of Social Security

The present paper provides an analysis of unfunded social securityas the outcome of a public decision making process in an endogenousgrowth economy. It employs a model in which there is a non-monotonic relationship beween productivity growth and the scale ofpublic intergenerational redistribution. The paper shows thatalthough unfunded social security need not harm growth in general,it is likely to harm growth in a democracy. This effect isreinforced by population aging.

Fiscal Competition and Higher Education Spending in Germany

Abstract The present paper studies the determinants of higher education spending by the German federal states with a focus on the interplay between higher education spending of neighboring states. More specifically, the paper asks whether the German federal states free-ride on one another’s higher educational spending or whether they employ higher education spending to attract university graduates. We identify a positive relationship between the states’ higher education spending and conclude that the states compete for graduates rather than free-ride. We also consider the effect of the recent introduction of tuition fees in some, but not all German states. We do not find evidence that tuition fees led to crowding out of public higher education funds.

Tuition fees and the time to graduation: evidence from a natural experiment

We used the recent introduction of general tuition fees at public universities in several of the German federal states as a natural experiment to identify whether tuition fees reduce the time to graduation and the extent to which they do so. We employed a difference-in-differences approach with the states that introduced fees as the treatment group and the states that remained fee-free as the control group. Our results indicate that the introduction of tuition fees led to a significant decrease in the time to graduation.