Year: 2025
Type: article
Abstract: We try to rationalize the fact that a positive correlation between higher education attainment and aggregate productivity becomes less clear as a higher share people completes college. For that purpose, we model this situation by means of a coordination ( Stag Hunt ) game, where a youngster obtains the benefit of higher education only if there is a critical mass of students. During the initial stage the net reward of higher education is high, so that the Nash equilibrium with general enrolment is selected. As compulsory education is raised, the wage premium of attaining college decreases and furthermore universities that expand to low density regions become less efficient as they face increasing diseconomies of scale in their operation. The decrease in the net reward of graduates is multiplied by the fact that the strategy of avoiding higher education becomes “risk-dominant” in Harsanyi and Selten (1988)’s terms. This fact likely causes a coordination breakdown , where the share of people with a complete university degree may possibly rise despite the output per worker decreases. This socially undesirable outcome can be avoided through a policy aimed at enhancing the college network through its geographical concentration. For this purpose, the relocation of a significant share of students appears to be necessary. JEL codes : C72, I25, 015, R11
Source: The Annals of Regional Science
Author: José Pedro Pontes
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,090
OpenAlex ID: W4410788264