International Comparisons in Higher Education

Funding

Domingo Docampo
ETSE Telecomunicación, Universidade de Vigo, Spain
email: ddocampo@uvigo.es

working paper: April 21, 2007

Chapter 1

Introduction

Education, by and large, is considered a public good, since it usually meets

the criteria of being both non-excludable and non-rivalrous1 . Consensus
around the ‘public good’ character of primary and secondary education is
overwhelming; as public goods, they must be made equally available to all:
they cannot therefore be provided for profit[Fis06]. Hence, in developed
countries (and some developing countries as well 2 ), state support reaches
every school so it can offer standard quality education (i.e. the best educa-
tion the system can provide regardless of the point of access) to the largest
possible share of the population3 . As such, these public goods can be sup-
ported by taxpayers and their delivery addresses both equity and efficiency,
since universal access and quality of service guarantee that nobody gets ex-
cluded, and there should be no easy and effective way of cheating to benefit
from a rivalrous choice.
Consensus breaks down at the point of tertiary education, particularly at
college education. According to standard economic theory, higher education
does indeed result in a large surplus of positive externalities, in the sense
that the educated person will benefit the society as a whole by producing
better goods, providing better services, and paying more taxes4 .
There is little or no discussion around the social value of Higher Ed-
ucation, given the positive externality that it spills over society at large.
However, from the point of view of the recipient of education, he or she
will end up being much better off, will enjoy more opportunities of career
building and enhancement, and will earn more money than remaining une-
ducated. It is then indisputable that higher education retains most of the
characteristics of a public good, but the private benefits accrued to students
are very apparent as well. Therefore it is argued that that kind of education

1
should be paid off at least in part by the students, either up front or later
on, once they graduate 5 .
Equity is not per se attached to free education, it should be related to the
ability of the higher education system to accommodate all the aspirations of
the youth, regardless of their socio-economical background6 . However, far
too many developed countries show levels of access to higher education that
lie below one third of the population at the applicable age. By and large,
and particularly in most European countries, government policies have not
been that successful in encouraging, to the desired extent, students from
disadvantaged socio–economic backgrounds to embrace tertiary education,
much less college education.
Therefore, unless universal access to higher education is in place, there
is a strong rationale for asserting that free higher education may be actually
regressive, involving a significant transference of rents from the poor to
the wealthy7 . Nevertheless, the issue is so subject to partisan argument,
and so attached to ideology, that piling up evidence from sound scholarship
over the past 20 years has not helped to open a public debate except in
a few countries in the Anglo-American tradition (in the UK as recently as
2003, back in 1987 in Australia, with New Zealand following suit) and late
newcomers (East Asian countries).
It is unfortunate, but true, that broad based questioning on the role
of public funding in higher education is lacking in society at large [Fis05].
In continental Europe this is one of the non-debatable issues, a taboo, as
university officials and politicians alike recognize.
The pertinent discussion would be how to evaluate the externality de-
rived from each person’s education and compare it to the benefit accrued to
the graduate; it should not be difficult then to share the costs accordingly.
Governments would have a way to internalize the positive externalities
derived from education —that add social value to the private value accrued
to its recipients— which is to evaluate the shift in the demand curve of higher
education and introduce the subsidy that moves the equilibrium point close
to the desired optimum. Hence, by looking at the subsidy one can deduce
the value placed by governments on the positive externalities of higher ed-
ucation. Apart from the Scandinavian nations, countries spend in general
between 0.8 and 1.5% of their GDP in subsidizing higher education, with the
OECD average situated at 1.3%. All States make provision for the students
to pay their share, although the differences in quantity are very significant.
Most OECD countries charge nominal fees for public higher education ser-
vices, while a small number of them allow for a larger contribution from the
students8 .

2
 The overall result is that in a number of countries the total effort in
higher education exceeds largely the OECD average. Those are the coun-
tries that actually place a larger value on the returns of higher education.
Among European countries, the group of Scandinavian nations does assign
a high social value to education in general and to higher education in partic-
ular. They encourage young people to pursue tertiary education; therefore,
they include in the State subsidy the private value accrued to graduates.
Other European countries, by stating the entitlement to higher education
as a universal right, but by under-financing universities, actually assign a
lower social value to education, contradicting in practice what they state in
principle. It is very difficult to question the status quo; persistent figures
show how the debate on higher education financing is permanently unre-
solved in those countries. But the debate took place in Australia 20 years
ago, and very recently in the UK.
In this paper we analyze the different approaches observed in tertiary
education funding. We will be assessing the role of governments in pro-
moting higher education, and make international comparisons on relevant
indicators to find out whether actual policies are coherent with assumed po-
litical stands. We will first proceed with the discussion of the ‘public good’
character of tertiary education, and see then what international indicators
tell us about the effect of the policies on the entry rate to universities.

1.1 Is Higher Education a Truly Public Good?

For some, the idea of higher education as a public good is linked to the notion
that without state intervention the market would fail to provide adequate
provision for all citizens [Huf]. However, that requires the inclusion of all
citizens who either do not wish or are not able to participate in the benefits
accrued by higher education; therefore, they will also have a say in the
degree of private benefit which may be derived from higher education either
to students or to institutions themselves[Fis06].
Following [Bar04], there are some practical objections that proponents
of free higher education must face. In what follows we will summarize the
discussion around the most difficult argument, excluding simple ideological
positions as the one that asserts that higher education is a basic right and
should therefore be free, for the same reasons that a similar argument could
be employed on even more solid ground for food and shelter.
The main and substantial argument goes as follows: Higher education
should be wholly tax funded because graduates earn on average more (much

3
more during a lifetime9 ) than non-graduates. Therefore, by virtue of the
greater income taxes they return (again much more during a lifetime) grad-
uates actually pay back for the education taken. To this, Barr offers some
counter-arguments:

1. Income tax is paid by many more non-graduates than by graduates.

2. Free higher education is horizontally inequitable. A person with a

degree pays around an additional US$200,000 in tax, 20% of which is
deemed to pay for higher education. A graduate pays then US$40,000
less than a non-graduate with identical lifetime income.

3. The taxpayer gets ‘a good deal’ argument would also say that they
(the taxpayers) should subsidize all development costs of successful
firms, which pay more taxes as well. By the way, What about the
unsuccessful ones?.

4. There are limits to taxation, not least of political pressures, which

collide with other priorities for public spending.

It can be argued that there are countries in which income tax might be
high enough as to render the first argument weak. And, at least in some
countries, a very large percentage of the population does access higher edu-
cation, showing that horizontal equity can at least be approached. Besides,
the consensus of public opinion around the importance of knowledge and
the benefits accruing to society by research and development is beyond par-
tisan debate in some countries. The same thing applies to education if it
is believed that improving it is the only mean to face the challenge posed
by globalization; accordingly, education could become the first and foremost
priority, and that includes higher education.
Were some or all of these conditions to coincide in a particular country,
there would then be a strong rationale for a heavily subsidized tertiary
education sector. We shall see how the group of Scandinavian countries
has consistently held public policies that make them good examples of a
remarkably very successful public support of higher education. Some other
countries have tried to improve the quality of higher education by seeking
contribution either from students, or from graduates. What is interesting
is that evidence shows how equity is not at stake in the majority of the
countries that have taken that option10 .
In the only country where higher education has never been free, the
American public believes that a college education is a very valuable asset

4
and wants as many people as possible to have access to it. Hart and Teeter
[HT03] conducted a national survey in 2003, and found that public opinion is
divided about the status of higher education as a basic right or as something
that has to be earned. What is most remarkable is that in spite of that
divide, there is neither a generation nor a partisan significant gap on this
issue (right or privilege), showing clearly how the American public opinion
actually perceives both the public and private benefits of higher education11 .

1.2 Two approaches to higher education funding

In [Bar04] the nature of higher education policies is characterized in terms
of two ‘stylized’ models:

In the ‘Anglo-American’ model, policy sees higher education as

heterogeneous, and encourages diversity, varied forms of provi-
sions, and quality comparisons between them. In the ‘Scandina-
vian model’, policy is based on the assumption that institutions
are homogeneous, and therefore treats them equally and regards
all programs as equals.

But it is not difficult to note that the phrasing of the models in Barr
does not come free of implicit assumptions underlying the particular words
chosen, since quality is much more easily associated with diversity than with
uniformity. As far as diversity is concerned, one cannot deny the extraordi-
nary diversity of the American higher education institutions, arranged in a
three-tier layer of research universities, teaching only colleges and commu-
nity colleges. It constitutes a well-known successful model of higher educa-
tion, capable of the best and of the least12 . But we could make an attempt
to rephrase the two models in such a way that no unnecessary assumptions
are made before analyzing the available evidence.
The Scandinavian model would be one characterized by very high taxes,
a strong R&D commitment, substantial public spending in higher education,
and large enrolment figures.
The Anglo-American model should instead be attached to much lower
taxes, strong R&D commitment, substantial private spending in higher ed-
ucation and large enrolment figures as well.
To confirm, or not, the characteristics posed, we will be using data taken
from the most recent international compilation offered by OECD on its
Education at a Glance, released in September 2006.

5
 To reduce complexity in the treatment of the data, without leaving out-
side any relevant information, we have chosen the Scandinavian countries, a
number of continental European countries including the four largest among
them, some Asian countries, and countries in the Anglo-American track.
The data in Education at a Glance has been compiled in 2006 but corre-
sponds in general to 2003 or 2004. The indicator of enrolment corresponds
to the academic year 2003-04. We would have liked to use the OECD entry
rate indicator (percentage of youth in the corresponding age entering ter-
tiary education) as an pointer to equity, as it is obvious that the higher the
entry rate the better the access opportunities to higher education. Unfor-
tunately, at this moment the indicator presents severe inconsistencies in the
distinction between type A and type B tertiary education students, which
render it practically useless for the present study. We will instead anchor our
analysis in the much more reliable Enrolment Indicator from the Economist
[Eco07], based on the World Bank corresponding gross enrolment ratio: ac-
tual number enrolled as a percentage of the number of youth in the official
age group.

6
Chapter 2

International Comparisons

2.1 Data for the International Comparisons

The data selected from the OECD tables concern the following indicators:
I1 Public expenditure on education as a percentage of GDP.
I2 Public expenditure on higher education as a percentage of GDP.
I3 Private expenditure on higher education as a percentage of GDP.
I4 Total spending on higher education as a percentage of GDP.
I5 Taxes on average worker
I6 Enrolment
I7 Gross domestic expenditure on R&D relative to GDP.
where,
1. Public Expenditures correspond to OECD indicator B4, which mea-
sures direct public expenditures on educational institutions plus public
subsidies to households (which include subsidies for living costs) and
other private entities as a percentage of GDP. We have selected in-
dicator B4 for the reason that if equity is what is at stake, not only
direct expenses on institutions are to be measured, student help to
cover living expenses should be accounted for as well.
2. Private expenditures in higher education correspond to OECD indi-
cator B2.1b, which measures funding to educational institutions by
private sources.

7
 3. Income tax indicates tax on average worker (OECD economic indica-
tor).

4. Enrolment corresponds to gross enrolment ratio: actual number en-

rolled as a percentage of the number of youth in the official age group.

We will now offer comparisons on relevant pair of variables that manifest

the clustering of the countries. We shall see how it is apparent from the
plots that data confirms the existence of both the Scandinavian and the
Anglo-American approach to higher education. We will then confirm the
fact using appropriate statistical tools.
Across the plots, the following acronyms will be used: AUS Australia,
CAN Canada, DEN Denmark, FRA France, FIN Finland, GER Germany,
ITA Italy, JAP Japan, KOR South Korea, NET Netherlands, NOR Norway,
NZE New Zealand, SPA Spain, SWE Sweden, UK United Kingdom, USA
United States of America. Table 3.1 shows the set of indicators for a number
of OECD countries.

Indicators
Country I1 I2 I3 I4 I5 I6 I7
Australia 4.8 1.1 0.8 1.9 28.6 73.0 1.7
Canada 5.0 1.7 1.0 2.7 32.3 58.0 2.0
Denmark 8.3 2.5 0.1 2.6 41.5 67.0 2.6
Finland 6.5 2.1 0.1 2.1 43.8 88.0 3.5
France 5.9 1.2 0.2 1.4 47.4 56.0 2.2
Germany 4.7 1.2 0.1 1.3 50.7 51.0 2.5
Italy 4.9 0.8 0.2 1.0 45.7 57.0 1.2
Japan 3.7 0.6 0.8 1.4 26.6 51.0 3.2
Korea 4.6 0.6 2.0 2.6 16.6 85.0 2.6
Netherlands 5.1 1.3 0.3 1.6 43.6 58.0 1.8
Norway 7.6 2.3 0.1 2.4 36.9 81.0 1.8
New Zealand 6.8 1.6 0.6 2.2 20.7 77.0 1.2
Spain 4.3 1.0 0.3 1.2 38.0 62.0 1.1
Sweden 7.5 2.2 0.2 2.3 48.0 83.0 4.0
United Kingdom 5.4 1.1 0.3 1.4 31.2 64.0 1.9
United States 5.7 1.5 1.6 3.1 29.6 83.0 2.7
Source: OECD Education at a Glance 2006

Table 2.1: Main Indicators

8
 Indicators
Correlation I1 I2 I3 I4 I5 I6 I7
I1 1.00 0.90 -0.40 0.48 0.25 0.52 0.24
I2 1.00 -0.41 0.56 0.32 0.45 0.29
I3 1.00 0.53 -0.75 0.29 0.08
I4 1.00 -0.39 0.69 0.34
I5 1.00 -0.32 0.19
I6 1.00 0.34
I7 1.00

Table 2.2: Correlation Matrix

Figure2.1 shows the consistency of the public policies of funding for all
the levels of education and for the particular segment of higher education.
The Scandinavian countries score high in the two indicators at short distance
from New Zealand, and at some distance from the next three countries (USA,
Canada and France). It also shows how Korea and Japan, Italy and Spain
fall behind in these two indicators. The correlation coefficient, 0.90, is very
high in this case.

DEN
NOR
!
!!
SWE
FIN ! !
!
CAN !!
NZE
USA! !
NET
! !!
GER! UK FRA
SPA!
!AUS
! ITA
!! KOR
JAP
!

Figure 2.1: Public Spending in Education vs. Public Spending in Higher

Education

Figure 2.2 clearly reflects the clustering of the four Scandinavian coun-
tries around the highest positions in public spending and among the top
in total spending in tertiary education. Correlation coefficient is now 0.56.
The divide is now clear, with Australia somehow leaving the group of lagers
towards the Anglo-American model.

9
 USA

KOR CAN
DEN
(
(SWE ((
((NOR
((( FIN NZE
((
(( (AUS
((((
NET
(( FRA UK
JAP SPA GER
ITA

Figure 2.2: Total Spending vs. Public Spending in Higher Education

Figure 2.3 shows relevant information on the relation between total

spending in higher education and investments in R&D, with a correlation
coefficient of 0.34. We see the Scandinavian countries -but Norway that
shows a worse record in R&D spending perhaps because of the recent dis-
covery of natural resources- clustered with the USA, and Korea, which also
combine high spending in tertiary education with strong commitment to
R&D. On top of the regression line (higher in total expenditures in tertiary
education), we found only countries belonging to the two models. Finland
and Sweden would also be there, but their record setting commitment to
R&D places both countries slightly behind the regression line.

USA

CAN
KOR
DEN

NZE
NOR ((((
(((SWE
( (( FIN
AUS ((((
(( ((((
NET
UK FRA GER JAP
SPA
ITA

Figure 2.3: R&D expenditures vs. Total Spending in HE

Now, Figure 2.4 points to a positive correlation between public expenditures

in higher education and taxes on average workers (0.32), while Figure 2.5
shows a negative correlation, once total expenditures in higher education
are taken into account (-0.39).

10
 GER
FRA SWE
ITA
NET (( FIN
((DEN
(((((
SPA ((( (
NOR
( (( (((
( CAN
UK USA
AUS
JAP

NZE
KOR

Figure 2.4: Public spending in HE vs. Taxes on average worker

GER
FRA SWE
ITA
NET FIN
XXX DEN
X
SPAXX
XXX NOR
XXX
UK XXCAN USA
AUS XXX
JAP XXX
NZE
KOR

Figure 2.5: Total spending in HE vs. Taxes on average worker

Both figures point to the fact that private funding for higher education
is highly correlated (0.75 in absolute value) with low levels of taxes for
the average worker. In both figures, the cluster of the Nordic countries is
very apparent, combining large income tax levels with high spending (either
public or total) in higher education.
Figure 3.6 speaks for itself. Correlation is significant (0.52), and the
clustering is apparent, although the results for Denmark point to a deviation
from the pattern difficult to explain. The same thing occurs to Canada,
which one would expect to find on top of the regression line. Again, the
Scandinavian countries, USA, South Korea, Australia and New Zealand,
show the highest enrolment rates among all the countries. Finally, Figure 7
shows again the clustering of the Scandinavian countries, this time close to
countries which made room for private spending in higher education, with
Australia, Finland, Norway, New Zealand, South Korea and Sweden over
achieving and the USA, Denmark and remarkably Canada underachieving
around the regression line.

11
 FIN
KOR
USA SWE
 NOR
NZE  

AUS


 
 DEN
SPA
  UK
 
CANNET
ITA FRA

JAP GER

Figure 2.6: Public spending in Education vs. Enrolment

FIN
KOR 
SWE  USA
NOR 
NZE  
AUS  

 DEN

UK 
SPA 
ITA
 NET CAN
 FRA

GERJAP

Figure 2.7: Total spending in HE vs. Enrolment

The divide between the countries in what we have called the Scandina-
vian approach (Scandinavia) and the Anglo-American approach (Australia,
Canada, New Zealand, South Korea and the USA), and the rest of the coun-
tries is clearly shown in this Figure. The correlation, 0.82 is very significant,
showing how increasing spending (either way public or private) has a great
impact on enrolment and equity.

12
2.2 Factoring the two models
In order to characterize the behavior of the countries on their approach
or escape from what we have called the Scandinavian approach, we will
first perform a factor analysis on the set of indicators. The analysis was
done using the main principal components —the ones showing an eigenvalue
greater than one13 . The table of communalities14 is shown below, the higher
(the closer to 1) the communality the greater the impact of the indicator
in the selection of the axes or factors given by the principal component
analysis.

Communalities I1 I2 I3 I4 I5 I6 I7
Final 0,86 0,89 0,96 0,86 0,69 0,75 0,33

Table 2.3: PCA Communalities

The table shows how all the indicators but I7 present a high communal-
ity value, making the discriminator coming out of the two main principal
components statistically sound.

Princ. Component Eigenvalue % of var. explained accumulated

1 2.69 38.5 38.5
2 2.65 37.7 76.2

Table 2.4: PCA Components

As predicted, the two principal components are very powerful, and jointly
explain a good deal (more than 76%) of the variance present in the data.
The regression coefficients used to obtain the punctuation in both principal
components are shown in Table 2.5.

Indicators I1 I2 I3 I4 I5 I6 I7
First Component 0,88 0,89 0,47 0,74 0,55
Second Component 0,97 0,8 -0,81 0,46

Table 2.5: PCA Regression Coefficients

The indicators lie arranged as Figure 2.8 plots.

13
 I3
I4

I6

I7

I1I2

I5

Figure 2.8: Clustering of Indicators

DEN SWE
NOR

FIN

NZE
USA

CAN
FRA
NET AUS
UK
KOR
GER
SPA
ITA

JAP

Figure 2.9: Principal Components Clustering of countries

The plot of the two components for the countries included in the study
is very apparent. Figure 2.9 shows the perfect clustering of the Scandi-
navian countries on the second quadrant, providing the signature for the
Scandinavian approach. The Anglo-American approach shows up on the
first quadrant. The clustering now is fuzzier, because the variance within
the Anglo-American approach is larger than the one shown by the Scandi-
navian countries. The UK does not conform yet with the model due to its
weak figure for total expenses in higher education.

Figure 2.10 shows now the results from both principal components.

14
 KOR

USA

CAN
AUS NZE
JAP

UK FIN
SPA SWE
NOR
NET FRA
DEN ITA
GER

SWE
DEN FIN
NOR

USA

NZE

CAN KOR
FRA
AUS NET
UK
GER
SPA
ITA
JAP

Figure 2.10: Values of the first and second principal component:

38.5% an 37.7% of the variance explained, respectively

15
 The set of coefficients in Table 2.5 corresponding to the largest eigenvalue
clearly signals to the combination of high public and total spending with
large enrolment, discarding the data on private spending and taxes on the
average worker. The second set of coefficients, corresponding to the second
largest eigenvalue, points to a negative weight to public effort and high
taxes, and places the highest weight in private spending. It also accounts,
to a lesser extent though, for total spending in Higher Education.
We can see that the pair of axes selected by the statistical analysis does
constitute a very good discriminator, but shows some weakness in explaining
accurately the reasons behind the clustering observed. As seen in Table 2.2,
indicators I1, I4, I6 and I7 correlate positively, slightly in the case of I7
though. The remaining indicators measure the relation between public and
private effort in higher education spending and among them and the level of
taxing in the different countries. The first group of indicators is related to the
common aspects of both Scandinavian and Anglo-American models, since
both treat non-tertiary education as a public good, fund higher education
properly (total spending), are committed to R&D and share large enrolment
figures. Indicators I2, I3 and I5 point to the great divide in higher education
funding, and its relation to the level of taxes on the average worker.
We will treat both groups of coefficients separately. Each group of in-
dicators should play the role of a unidimensional scale, hence only the first
eigenvalue should be greater than 1. Besides, both principal components
from each scale (group of indicators) should be uncorrelated to guarantee a
reasonable discriminant power.
According to the characteristics assumed for the two approaches, can-
didates to the Scandinavian model should get good positive scores in both
components, while countries from the Anglo-American approach should get
positive good scores in the first set of indicators (I1,I4,I6,I7) and negative
ones in the second set (I1,I2,I5). Table 2.6 shows the communalities, eigen-
values, KMO and Bartlett’s test from the principal component analysis for
indicators I1,I4,I6, and I7 (let’s call them scale M1).

16
 Communalities I6 I4 I7 I1
Final 0.76 0.56 0.43 0.40
PC Eigenvalue % of var. explained accumulated
Eigenvalues 1 2.15 53.7 53.7
2 0.88 22 75.7
KMO BARTLETT Sphericity Test
value Chi-Square deg. freedom Significance
5.60 12.95 6 0.04

Table 2.6: KMO and Bartlett Tets for Set 1

The result of the communalities of the principal component analysis for

indicators I2,I3, and I5 (let’s call them scale M2) are shown in Table2.7.

Communalities I3 I5 I2
Final 0.83 0.75 0.41
Princ. Component Eigenvalue % of var. explained accumulated
1 1.99 66.4 66.4
2 0.75 25 91.4
KMO BARTLETT Sphericity Test
value Chi-Square deg. freedom Significance
5.81 12.6 3 0.006

Table 2.7: Communalities, KMO and Bartlett Tets for Set 2

The preliminary analysis conforms to the characteristics predicted so

far. Unidimensionality of the scales and appropriate values of both KMO
and Bartlett tests15 to continue the factor analysis. Once the two principal
components from both scales are computed, their correlation is shown to be
almost negligible (-0.006), which confirms our initial hypothesis. Table 2.8
shows the coefficients of the indicators in the scales.

Coefficients
Scales I1 I2 I3 I4 I5 I6 I7
M2 0.64 0.91 0.87
M1 0.63 0.75 0.87 0.66

Table 2.8: M1 and M2 PCA coefficients

17
 With the two uncorrelated scales, we have two regions that summarize
the discussion on the two models so far. On the first quadrant, the re-
sults correspond to the Scandinavian model, and countries within the fourth
quadrant correspond to the Anglo-American approach (Korea included).
Figures 2.11 to 2.2 clearly show the large land between countries within
the two models and the rest of the nations analyzed. It is within that large
land where the major challenges rest, although the UK has already initiated
a departure from there in 2003.

DEN SWE
FIN
NOR
GER
FRA
NET
ITA
SPA

UK
CAN

AUS NZE

JAP
USA

KOR

Figure 2.11: Principal Components M1 and M2 Scales

18
 DEN SWE
FIN
NOR
GER
FRA

NET
ITA
SPA
UK
CAN
AUS NZE
JAP USA

KOR

Figure 2.12: Landing from Scandinavia

SWE
USA FIN

KOR
DEN
NOR

NZE
CAN
AUS
FRA
UK
NET JAP
GER
SPA
ITA

Figure 2.13: Landing from the Future

The analysis so far shows how both approaches, the Scandinavian and the
Anglo-American, lead to cope with the challenge of funding higher education
while preserving equity. Unfortunately, most of the continental European
countries conform to neither approach; their data shows a remarkable gap
between theoretical stands and actual policies, leaving their higher education
systems (and hence universities) in a weak position within the international
context. We have also seen how R&D investments appear to be well linked
to these two models —The case of Norway, which somehow deviates from
the pattern in this particular indicator, might be related to the accrued
wealth from the oil reserves— confirming our initial exploratory analysis.

19
2.3 Final remarks
Higher Education is on its way to become a universal aspiration16 . Countries
struggle to enlarge opportunities for accessing higher education but differ in
how they would share the costs with students and graduates. OECD indica-
tors show that the challenges of equity are being successfully addressed in the
countries that have taken either the Scandinavian or the Anglo-American
way17 . Many European countries make ambiguous claims about equality
and learning opportunities, but evidence suggests that social background
plays a larger role in determining a student’s performance in continental
Europe than in Scandinavian or Anglo-American countries18 .
Climbing the ladder of higher education investment is costly and lengthy,
unless firm resolutions are taken in setting up public spending in education
as a true national priority or provisions are made to share the costs between
students, graduates and taxpayers. When the fruit is ripe students have
proven not to be afraid of taking risks if the reward is dear and worth the
effort. Two generations ago, Korea was counted among the poorest countries
within OECD (its living standards were equivalent of today’s Afghanistan),
and its educational standards were well below OECD average. Today, an
astonishing 97% of 25-to-34 year-old Koreans have completed secondary
education —By far the highest rate among OECD countries19 — and its
figures for tertiary education are impressive.
So far, Scandinavian countries have been keeping close to the Scandina-
vian model, although it might be the case that taxes are already too high20
and public expenditure will be more tightly scrutinized as the population
age21 . In any case, what we have called the Scandinavian model is solidly
grounded; in a forthcoming paper we will show how the model is compatible
with institutional diversity and quality.
By and large, the countries that fall within the two models analyzed
in the paper constitute successful education examples. They set ambitious
goals to which others can aspire, and have shifted from talking about equity
to actually delivering it22 .
Other countries theoretically assume the challenge of the Scandinavian
model but fail to apply a coherent set of policies towards realizing its goals.
Contributions from students and graduates are small or negligible, partly
reflecting funding agreements designed for a different era, but student in-
take has climbed rapidly over the last two decades and competing demands
on government expenditure have squeezed spending on Education23 , since
countries wishfully embraced expansion but few of them took the appro-
priate policy measures24 . Looking at the new rising stars in Asia, it is

20
undoubtedly likely that a change of attitudes will be necessary, particularly
in Europe, to turn globalization from a threat to an opportunity, and higher
education funding will have to be part of it.
John Kenneth Galbraith once said that given the choice of proving that
changes are unnecessary, most people start working on the proof. The lat-
est OECD’s report on Education at a Glance advices otherwise: accepting
international bench-marking in educational performance is the basis for im-
provement, not seeking reasons why education systems should not or cannot
be compared. “It is only through such bench-marking that countries can
understand relative strengths and weaknesses of their education system and
identify best practices and ways forward”.

Notes
1
[Man98] page 220, “Excludability is the property of a good whereby a person can
be prevented from using it while rivalness is the property of a good whereby a person’s
use diminishes other people’s use. Public goods are neither excludable nor rival”. The
simplest example of a public good is an uncongested public highway. If it is congested, it
becomes a natural resource, rival but non excludable. If it is a toll highway then if it is not
congested it is excludable but non-rival, but if it is congested, it becomes both excludable
and rival as any other common private good”.
2
[ST06] pp. 26-27, “Between 1990 and 2005, the rate of progression in China from
primary to lower secondary school increased from 75% to over 98%, from lower to upper
secondary education from 41% to 70%, and from senior high school to tertiary education
from 27% to 76%. Between 1995 and 2004 alone, the number of students attending
university more than doubled in China and Malaysia, and rose by 83% in Thailand and
51% in India”.
3
Figures close to 100% in Elementary and Middle School and approaching the top in
High School or equivalent, according to recent indicators for many OECD countries. See
for example [OEC06], tables A1 and A2.
4
See [Man98] page 205, “Consumption of Education yields positive externalities be-
cause a more educated population leads to a better government, which benefits everyone”.
5
See [Mar05] page 2, “public universities, especially the flagship universities, provide
not just collective public goods but high status private goods for their graduates: and
that is the case even where university education is free of tuition charges”
6
[Bar04] page 266, “the equity objective is not free education, but a system in which no
bright person is denied a place because he or she comes from a disadvantaged background:
a system in which the ability of the brightest students to study at the most intellectually
demanding universities is unrelated to their socioeconomic background”.
7
Barbara Ischinger, in [OEC06] page 18, “[Education systems] must scale back the
inherent class bias and sometimes catastrophically regressive way of funding existing edu-
cational opportunities taxing the poor to subsidize educational opportunities for the rich
in existing systems”, and [Jon04] page 1, “although some will disagree with part of the
evidence, one cannot deny that there is a lot of truth in the observations that most gradu-
ates earn significantly more than non-graduates and most students are from families that

21
may be regarded as more advantaged than others”. Also [Bar04] “Taxpayers subsidies are
regressive and free higher education has done bad on access.”
8
The majority of those countries seek a contribution from students but provide State
loans to support further participation in college education.
9
[OEC06] page 121, “Attaining higher levels of education can be viewed as an eco-
nomic investment in which there are costs paid by the individual (including reductions
in earnings while receiving education) that typically result in higher earnings over the
individual’s lifetime. In this context, the investment to obtain a university level degree,
when undertaken as part of initial education, can produce private annual returns as high
as 22.6%, with all countries showing a rate of return above 8%”. See also [DFG+ 05] page
9, “we estimate the median of the lifetime earnings distribution for male graduates to
be around 600,0 00 US$ higher than the equivalent for male non-graduates. For women,
the lifetime earnings advantage of the median graduate over the median non-graduate is
around 800,000 US$”. See also [DES05] page 8, “Recent data show that average gross
lifetime earnings for (Australian) university graduates are over US$450,000 more for men
and US$300,000 more for women by comparison with non-graduate counterparts”. Orig-
inal figures in British Pounds and AUS$, converted to US $. Nevertheless, a caveat is
opportune here, see [New04] page 6, “Certainly there is evidence of a positive correlation
between higher education expenditure and per–capita income growth but no clear evi-
dence of a causal relationship between the two. It is indeed extremely difficult to prove
any causal link between higher education and productivity as it is impossible to know
whether a graduate is more productive simply by virtue of being a graduate. In addition,
any analysis relies on formal qualifications and wages as measures: this is problematic as
qualifications”
10
Education at a Glance, page 270, cites Australia, USA and New Zealand along with
the Nordic countries among other few nations as the ones offering an entry rate into
university programs above 60% of young people, during their lifetime.
11
[HT03] page 8, “while most Americans agree that access to college should be widened,
they are divided on whether a college education is a right or a privilege. Forty-five percent
of adults say that a college education is a right that should be available and affordable to
all Americans, and 41% say that a college education is a privilege that must be earned.
There is a generation gap on this issue (younger adults see a college education as a right
(53% of 18- to 34- year-olds), while older adults see it as a privilege (52% of adults age 65
and over). Party identification also creates a division on this issue, with more than half
of Democrats (54%) believing that it is a right, and about half half (52%) of Republicans
seeing it as a privilege”
12
[HM05] pp. 1–2, “American Higher Education consists of about 3,400 institutions, but
it will never be confused with a system. It is both democratic and elite; some institutions
accept any applicant who is over the age of fifteen, while a handful of colleges rejects eight
out of ten applicants”.
13
Although varimax rotation was used, it was almost unnecessary since the un-rotated
and rotated factors are almost identical.
14
Communalities actually measure the proportion of each variable’s (indicator in our
case) variance that is explained by the principal components. By definition, the initial
value of a communality in a principal component analysis is 1. After the iteration process
to reach a solution takes place, the final value is the one associated with the solution
found.
15
Bartlett’s test of sphericity[Bar54] and the Kaise3-Meyer-Olkin (KMO) measure of
sampling adequacy[Kai74] are generated by SPSS to help assess the factorability of the

22
data. To consider the factor analysis appropriate the sphericity test should be significant
(p < 0.5). The KMO index takes values between 0 and 1. The closer to 1 the better.
The minimum value to proceed further is 0.5, and 0.6 is suggested for a good factor
analysis[TF96].
16
See Adrian Wooldridge, The brain business, Survey on higher education: The Economist,
September 8th. 2005, “The conservative argument (it is foolish to waste higher educa-
tion on people who would rather study ‘Seinfeld’ than Socrates) falls at the first hurdle:
Anglo-Americanity. Higher education is rapidly going the way of secondary education: it
is becoming a universal aspiration”.
17
See Barbara Ischinger, Education at a Glance 2006, page 18.
18
See [ST06], page 31.
19
ibid, page 26
20
See [Coo04] page 155, “Continental European countries are close to the Anglo-American
limits of taxation, around 50% of GDP”.
21
See Lundsgaard, J., and Turner, D., Study now, pay later, OECD Observer, March
2004.
22
See Adrian Wooldridge, “If more and more governments are embracing massification,
few of them are willing to draw the appropriate conclusion from their enthusiasm: that
they should either provide the requisite funds (as the Scandinavian countries do) or allow
universities to charge realistic fees. Many governments have tried to square the circle
through tighter management, but management cannot make up for lack of resources”.
23
See [Mar06], page 37, “The situation facing Europe today, with the dramatic rise of the
new Asian dragons, elephants and tigers presents a challenge, forcing Europe to compete
on basic products as well as very sophisticated ones with a high knowledge content. The
attitudes of European societies towards this, showing a readiness to make the changes
necessary changes to create the opportunities, will determine whether global competition
becomes more of an opportunity than a threat for them”.
24
See Barbara Ischinger, Education at a Glance 2006, page 18.

23
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