a review of innovative allocation mechanisms

1. a review of innovative allocation mechanisms Jamil Salmi and Art Hauptman International Conference Economics of Education: Major Contributions and Future Directions Dijon, 20-23 June 2006

2. key financing questions • resource mobilization • how much should be spent on tertiary education? (macro-level) • income generation at institutional level • who should pay, and what share? • when and how? • is it affordable? (student aid)

3. key financing questions • resource utilization • how should public resources be allocated? • how efficient and effective are institutions?

4. outline of the presentation • typology of allocation mechanisms • which mechanism is more effective? • preliminary lessons from international experiences

5. outline of the presentation • typology of allocation mechanisms

6. allocation mechanisms from untied funding to performance-based funding

7. performance-based funding • output-based formula funding • competitive funds • performance contracts

8. allocation mechanisms from direct funding to indirect funding

9. Colorado funding model Old Model Direct Government Funding Tuition New Model Indirect Gov’t Funding via Stipends Tuition & Stipends

10. Colorado experience • voucher for an undergraduate education at eligible universities; no cash in students’ hands. • $2,400 per year at public institutions • $1,200 per year for low-income students attending private institutions • degree-seeking, non-degree, and teacher licensure undergraduate students eligible • age, income and financial aid eligibility are irrelevant to qualify

11. Brazil ProUni • State purchases seats in private universities • offered to top students from low-income families who don’t get a seat in a public university • no actual payment, but tax exemption

12. Antioquia “access with equity” • partnership among local government, private firms and private universities • low-income students who don’t get a seat in a public university get financial aid to enter a private university • 75% scholarship and 25% subsidized loan

13. outline of the presentation • typology of allocation mechanisms • which mechanism is more effective?

14. Alice in Wonderland Lewis Carroll Alice Would you please tell me which way I ought to go from here? Cheshire Cat That depends on where you want to get to.

15. policy objectives pursued • improving access and equity • improving external efficiency • improving internal efficiency and sustainability

16. improving external efficiency • improving quality • competitive funds • merit-based scholarships • increasing relevance • formula with differential weights for high priority fields • competitive funds • grants and scholarships in priority fields • student loans in priority fields • loan forgiveness for students in public service jobs

17. outline of the presentation • typology of allocation mechanisms • which mechanism is more effective • preliminary lessons from international experience

18. themes • principles of an appropriate mechanism • country context • link to quality assurance • political economy dimensions

19. principles of an appropriate allocation instrument • linked to performance / policy objectives • transparent • flexibility • compatibility

20. which allocation instrument is better? • local circumstances • reform for what? • time dimension

21. link to quality assurance • pro: powerful incentive • con: punitive, rewards stronger institutions • link at the margin?

22. political economy dimensions • controversial topics • tuition fees instead of “free” education • targeted scholarships instead of universal • student loans instead of scholarships • private institutions alongside public institutions • dealing with the politics • not an excuse to avoid reforms