Increasing University Enrollment as Crisis Response

Increasing University Enrollment as Crisis Response

My friends in economics departments around the United States tell me that applications to PhD programs have trippled this year relative to last year. Some law schools have also reported a large increase in applications. This is because the unfolding crisis is putting lots of young people - particularly Wall Street types - out of jobs. What better time to get a graduate degree?

Even business schools report higher demand, even though one wonders what they really teach students there. Some "modesty" courses may be in order.

Increasing university enrollment is a good anti-cyclical device. In a country like the United States, this happens naturally as people with dimmed work prospects upgrade their skills. In smaller countries, this may be trickier as universities may be less prepared to meet increasing demand. Especially if they depend on government subsidies for financing a share of their operations. Hence, the need for a possible public policy.

Georgi Angelov, a senior economist at the Open Society Institute in Sofia, and I have just written a short paper on this topic, using data for Bulgaria as an example. The policy proposal is relevant for any country, however.

We develop a proposal for expanding university enrollment in Bulgaria by 30,000 students (or about 12% over 2008 enrollment). This is done by creating a student loan program guaranteed by the government. Student loans, offered competitively by commercial banks, would cover up to 50% of the cost of education. The remainder is covered by direct government subsidies (as is currently the case) and household income. The proposal is budget neutral – the government spends as much money on university education as in previous years.

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Posted by Simeon Djankov on February 12, 2009 in Eastern Europe | Permalink