University Funding Reform, Competition, and Teaching Quality

This paper explores the impact of university funding reform on teaching-quality competition. It shows that a graduate tax with differentiated, but state-regulated fees maximises the higher-education surplus, whereas student grants as well as pure and income-contingent loans do not. Fee autonomy for universities leads to results inferior to properly state-controlled fees and can make the majority of students even worse off than a central student assignment system with very poor teaching incentives.