Economics and Higher Education

Economics concerns itself with analysing how individuals, households, firms and governments make decisions about consumption and production within an environment of scare resources. This may typically take the form of a theoretical and/or empirical analysis, with the basic objective of helping to inform choices of efficiency and equity; choices that may often conflict with one another. Given the substantial interaction of various agents such as the state and individuals within the higher education system, this sector is therefore well-suited to an analysis from an economic viewpoint.4 While there is a wide range of important theoretical contributions from economics to higher education, much of the research to date in the area has been empirical in nature.

Economics is also a particularly useful lens from which to consider these issues as it offers a rigorous theoretical perspective, as well as a range of informative and insightful empirical methods that are not regularly used in other disciplines. For example, formal economic models provide a means of examining patterns of preferences, decisions and outcomes in a systematic and theoretically consistent way, based on testable underlying assumptions. This is particularly relevant when considering the choices facing school leavers in terms of if, and where, they go to higher education. Furthermore, since a key focus of economics is on the efficient allocation of scarce resources, economic models are particularly well-suited to considering issues such as where the burden of higher education funding should fall. This is an issue of particular importance in an era of constrained public finances.

Economic tools are also very useful for studying higher education issues and topics at an empirical level. This is because applied economics is built on causal analysis and provides a range of identification tools and strategies to this end, including a number of quasi-experimental approaches. In the absence of experimental designs and data, which is generally the case for higher education policy issues, such approaches can be used to evaluate the impact of access programmes, say, on a range of higher education outcomes. Applied economic methods are also particularly well-suited to identifying and analysing disparities in higher education participation decisions and other outcomes, while decomposition techniques can be used to identify the drivers or causes of a range of outcomes.

Thus, a key advantage of applied economics research, such as presented in the various contributions in this book, is that it helps to identify and quantify the key relationships involved in higher education policy issues and to answer a number of specific questions. For example, does the socioeconomic background of a young person determine whether they participate in higher education? Does this vary by other factors such as where the individual lives or goes to school? What factors impact on non-progression in third-level education? What are the regional impacts of HEIs? To whom do the greatest benefits accrue from higher education? Helping to answer such questions is one way in which economics can contribute towards public policy on higher education.

Internationally, the study of the economics of education, and higher education specifically, has expanded considerably in the past 25 years. Some notable works in the field include Blaug (1970), Cohn and Geske (1990), Belfield and Levin (2003), Johnes and Johnes (2004) and Toutkoushain and Paulsen (2016). The five volumes of the Handbook of Economics of Education also provide good insights into some key studies related to higher education from an economics perspective (Hanushek and Welch 2006a, b; Hanushek et al. 2011a, b, 2016). The key role that economics plays in higher education policy is further reflected by the fact that the National Bureau of Economic Research (NBER) in the US has an active programme of research on the economics of higher education. In the UK, the economic-minded Institute for Fiscal Studies (IFS) has a specific higher education research area, while the Centre for the Economics of Education (CEE), based at the London School of Economics (LSE), also regularly conducts economics studies related to higher education.

In an Irish context, there are two dedicated higher education research centres within HEIs (Dublin City University’s Higher Education Research Centre and Dublin Institute of Technology’s Higher Education Policy Research Unit), while The Economic and Social Research Institute (ESRI) also has an education-themed research programme. However, to date, research relating to higher education from an economic viewpoint has been relatively rare, with the main focus being on estimating the private return to education. There have also been a small number of economic studies that have considered socioeconomic disparities in participation, and others that have looked at the issue of higher education funding.

Other important issues have, however, remained largely ignored in Ireland. Indeed, Hazelkorn (2014) notes that the dearth of research, from the fields of economics and others, accounts for large gaps in our understanding of developments affecting Irish higher education. This book looks to address some of these gaps from an economics perspective.

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