Voting On Income-Contingent Loans For Higher Education

Elena Del Rey, María Racionero*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    3 Citations (Scopus)


    We consider risk-averse individuals who differ in two characteristics - ability to benefit from education and inherited wealth - and analyse higher education participation under two alternative financing schemes - tax subsidy and (risk-sharing) income-contingent loans. With decreasing absolute risk aversion, wealthier individuals are more likely to undertake higher education despite the fact that, according to the stylised financing schemes we consider, individuals do not pay any upfront financial cost of education. We then determine which financing scheme arises when individuals are allowed to vote between schemes. We show that the degree of risk aversion plays a crucial role in determining which financing scheme obtains a majority, and that the composition of the support group for each financing scheme can be of two different types.

    Original languageEnglish
    Pages (from-to)38-50
    Number of pages13
    JournalEconomic Record
    Issue numberSUPPL.1
    Publication statusPublished - Jun 2012


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