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.