‘See you soon?!’ Mobility, competition and free-riding in decentralized higher education financing

Geissler, M., & König, J.

Abstract: Highly skilled human capital is usually also highly mobile. Concerns regarding interregional migration revolve aroundsuboptimal publicfinancing of higher education rooted in free-riding behaviour if budget responsibilities aredecentralized. This investigation sets out to answer whether cross-state mobility of students in general and individualtaste variation in the preference for‘home’and‘university’states in particular justify concerns about the free-ridingbehaviour of state governments. We analyse graduates’location choices when leaving university using a mixed logitmodel and subsequently relate the revealed taste variation to individual characteristics. The results suggest someattachment to‘home’states that justify concerns about potential free-riding. However, substantial taste variationexists and is partly associated with the quality of human capital. State governments free-riding on the investment ofothers therefore may face a quality trade-off.