Tuition fees: User prices and private incentives

- We study the implications of tuition fees for public education services.
- The setup is a neoclassical growth model where agents differ in capital holdings.
- We focus on the role of tuition fees and how this affects private incentives.
- Tuition fees improve individual incentives and can be both efficient and equitable.

This paper studies the aggregate and distributional implications of introducing tuition fees for public education services into a tax system with income and consumption taxes. The setup is a neoclassical growth model where agents differ in capital holdings. We show that the introduction of tuition fees (a) improves individual incentives to work and/or save and (b) can be both efficient and equitable. The focus is on the role of tuition fees as an extra price and how this affects private incentives.