University tuition fees’ effect on future outcomes : A study on the correlation between higher education costs and income distribution
Abstract: This paper focuses on studying whether a tuition fee for obtaining higher education affects the wage distribution in the United Kingdom. The hypothesis builds on theoretical framework that the higher cost of obtaining education leads to a higher pay for workers with college diploma, which in turn widens the gap between wages with different schooling levels and increases the inequality in the country. A change introducing the tuition fees as well as comparison with European countries offering free higher education are used to estimate the correlation. Other than being one of the few countries that use the tuition-fee system, UK also has one of the largest wages dispersions. That creates an opportunity to research how education cost can affect the welfare of a country. Random effects analysis is run however, the original methodical framework provides insignificant results and the study needs to be limited to only 2000s, as opposed to the time frame from 1990 to 2000, to gain significance. The latter result confirms the hypothesis. A positive correlation between the costs for college and income dispersion is found, however the study fails to use the full potential to its advantage and focuses only on comparison between countries while omitting the policy change in the UK.
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