Tuition Fees and Equal Access to Higher Education in Germany and the EU: an Analysis from a Law and Economics Perspective
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Tuition fees and equal access to higher education in Germany and the EU: An analysis from a law and economics perspective Vom Fachbereich Volkswirtschaftslehre, Fakultät Wirtschafts- und Sozialwissenschaften, der Universität Hamburg zur Erlangung des akademischen Grades eines Doktors der Wirtschafts- und Sozialwissenschaften Doctor rerum politicarum (Dr. rer. pol.) angenommene Dissertation 2009 von Dorothea Charlotte Ringe Vorsitzender der Prüfungsausschusses: Prof. Dr. Manfred Holler 1. Gutachter: Prof. Dr. Hans-Bernd Schäfer 2. Gutachter: Prof. Dr. Arndt Schmehl Eingereicht: 17. Februar 2009 Disputation: 25. Juni 2009 II Preface This text is the updated version of my dissertation, which was accepted as a doctoral thesis in June 2009 by the Faculty of Economics of the University of Hamburg. Literature and case- law have been included until 1 February 2009. First and foremost, I would like to thank my supervisor Professor Hans-Bernd Schäfer for his support and encouragement in writing this thesis from its very early stages right through to the end. I would also like to thank Professor Arndt Schmehl for commenting on the legal parts of the thesis and for agreeing to be the second examiner. Important parts of this thesis were written during a stay at the University of St. Gallen, Switzerland. I would like to express my special gratitude to my host in St. Gallen, Professor Anne van Aaken, for her intellectual input and the many constructive discussions which continued also after I had left. In addition, I also had the chance to discuss my ideas with Professor Nicholas Barr, who invited me to stay at the London School of Economics, with Professor Robert Cooter at the University of California, Berkeley, and Professor John Armour at the University of Oxford during my extended stays as a visiting researcher. I have benefitted enormously from these discussions and research stays and would like to thank all of them for their support. Between October 2004 and September 2007, I was a member of the Graduate College for Law and Economics at the University of Hamburg. I am deeply grateful for the financial support of the scholarship by the Deutsche Forschungsgemeinschaft, which I received during this time, but also for being part of a great community of colleagues and friends, with whom I could discuss my ideas and who gave me invaluable feedback. Finally, I would like to thank my parents, my sisters, my brother and especially my husband for all their encouragement and love. Oxford, August 2009 Dorothea Ringe III IV Table of Contents Table of Contents ..................................................................................................................................................V 1. Introduction and Method ................................................................................................................................. 1 1.1 Motivation .................................................................................................................................................... 1 1.2 Background information............................................................................................................................... 4 1.2.1. Low investment and participation in higher education........................................................................ 5 1.2.2. Constitutional and political framework of tuition fee legislation ........................................................8 1.3 Literature overview .................................................................................................................................... 11 1.4 Integrating economic analysis into constitutional law applications ..........................................................16 1.4.1. Shortcomings of traditional normative analysis of law ..................................................................... 17 1.4.1.1 Normative economic analysis of law.......................................................................................... 17 1.4.1.2 The legal proportionality test ...................................................................................................... 20 1.4.2. The Van-Aaken-approach .................................................................................................................. 26 1.4.2.1 Constitutional principles as normative objectives.......................................................................28 1.4.2.2 Rational Choice theory to predict behaviour .............................................................................. 32 1.4.2.3 Normative decision theory to compare alternatives.................................................................... 33 1.4.2.4 Structure of analysing a normative question............................................................................... 34 1.4.2.5 Discussion of the Van-Aaken-approach ...................................................................................... 36 1.5 Research questions and thesis structure..................................................................................................... 37 2. Normative analysis of the German tuition fee and student loan legislation............................................... 41 2.1 Main characteristics of the legislation ....................................................................................................... 42 2.2 Economic impact assessment ..................................................................................................................... 45 2.2.1. Spending on higher education increased ........................................................................................... 48 2.2.1.1 Tuition fee revenue ..................................................................................................................... 48 2.2.1.2 Cost of the system....................................................................................................................... 49 2.2.1.3 Crowding out .............................................................................................................................. 51 2.2.2. Positive externalities of higher education increased.......................................................................... 52 2.2.2.1 Externalities on growth via innovation and imitation of technology .......................................... 53 2.2.2.2 Externalities on growth via public goods and institutions .......................................................... 54 2.2.2.3 Spatial distribution of higher education externalities..................................................................56 2.2.3. Overall demand for higher education not affected............................................................................. 58 2.2.4. Socio-economic composition of the student body............................................................................. 59 2.2.4.1 Student loans cannot compensate for the effect of socio-economic background on access........ 61 2.2.4.2 Student loans prevent new credit constraints through tuition fees.............................................. 66 2.2.5. Summary............................................................................................................................................ 75 2.3 Normative benchmark of constitutional principles..................................................................................... 77 2.3.1. Principles of non-discrimination and equal access ............................................................................ 77 2.3.2. Principle of investment in higher education ...................................................................................... 82 2.3.3. Principle of cost effectiveness ........................................................................................................... 84 2.3.4. Impact on the normative benchmark ................................................................................................. 85 2.3.4.1 Non-discrimination ..................................................................................................................... 86 2.3.4.2 Equal access................................................................................................................................ 87 2.3.4.3 Investment in higher education................................................................................................... 87 2.3.4.4 Cost effectiveness ....................................................................................................................... 88 2.3.4.4.1 Income-contingent repayments ........................................................................................... 88 2.3.4.4.2 Interest subsidies................................................................................................................. 89 2.3.4.4.3 Allocation of default risk .................................................................................................... 90 2.3.4.4.4 Collection of repayments .................................................................................................... 92 2.3.5. Summary............................................................................................................................................ 93 2.4 Constitutionality of the tuition fee and student loan legislation................................................................. 94 2.4.1. No interference with Articles 12 (1) GG, 3 (1) GG and 20 (1) GG..................................................