Expansion of Higher Education and Declining Quality of Degrees

<p>NEUJOBS Working Paper No. 4.4.2 B</p> <p>Abstract:<br>In this paper we study theoretically how the expansion of higher education could be associated with several factors indicating a decline in the quality of degrees. We assume that the expansion of tertiary education happens through three channels and show how they are likely to reduce average study time, average wages and increase grades. Firstly, universities have an incentive through public and private funding schemes to increase their student body beyond a level where they can keep their requirements on a high level. Secondly, due to skill-biased technological change, employers have the incentive to employ mostly labour with a higher education degree. Thirdly, students have the incentive to acquire a college degree due to the employment rules, the university application rules and through the rising social reputation of education. We develop a parsimonious dynamic model in which a student, a college and an employer repeatedly make decisions about requirement levels, performance and wage levels. Our model shows that if (1) universities have the incentive to decrease entry requirements, (2) employers are more likely to employ labour with a higher education degree and (3) all types of students enroll in colleges, the grade will not necessarily act as a mechanism to make weaker students study to catch up with the more able students. In order to reestablish a quality guaranteeing mechanism, entry requirements should be set to a higher level.</p> <p>