The expansion of higher education and time-consistent taxation

This paper analyzes educational choices and political support for subsidies to higher education in the presence of a time consistency problem in income redistribution. There may be political support for so generous subsidization that it motivates the median voter to obtain higher education. Therefore, the expansion of participation in higher education during the second half of the 20th century may have partly been driven by the aim to limit the political support for overly generous income redistribution. The paper concludes by considering the implications of globalization on the future of public financing of higher education.

Research Highlights►This paper links the expansion of higher education to the rise of the welfare state. ►Subsidies to higher education can be used to reduce future support for redistribution. ►Globalization is likely to reduce future redistribution and subsidies to education.