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Higher education is increasingly important to the labor market success of individuals and the prosperity of nations, yet, as this book shows, public funding for higher education is declining. It presents innovative approaches to increasing funding for universities through closer ties with business and through privatization of universities.




The funding of higher education faces a rather paradoxical challenge. On the one hand, universities are increasingly seen as the foundations of national prosperity and competitiveness, on the other hand, public funding of universities has declined in most developed market economies, as a number of the contributions to this book document. Thus, as government financial support for higher education has declined in Europe, Japan, and the United States, universities in these countries and elsewhere have been forced to turn to other sources of funding such as higher tuition fees, research cooperation with the business sector, and philanthropy to make up the difference. This book provides comparisons across a number of countries of how universities are adjusting to these new circumstances. What is clear from these comparisons is that who pays for the output of universities, whether it is education and degrees or research findings, how the amount of their payment is determined and how the funds actually reach the recipient universities is critical to how the higher education system functions.

Josef C. Brada

1. Competing for Public Resources: Higher Education and Academic Research in Europe — A Cross-Sectoral Perspective

The chapter focuses on the increasing cross-sectoral competition for public resources between various types of public sector institutions in Europe and its implications for future public funding for both higher education and academic research. It views the major models of the institution of the modern (Continental) university and the major types of the modern institution of the state, and of the welfare state in particular, as traditionally closely linked (following Becher and Kogan, 1992; Kogan and Hanney, 2000; Kogan et al., 2000). Historically, in the postwar period in Europe, the unprecedented growth of welfare states and state-funded public services was paralleled by the unprecedented growth of public universities. The massification of higher education in Europe coincided with the growth of the welfare state in general. We are witnessing massification processes in higher education and far-reaching restructuring processes of welfare states. The major implication is the fierce competition for public resources, studied in this chapter from a cross-sectoral perspective, in which the future levels of public funding for higher education in tax-based European systems are highly dependent on social attitudes toward what higher education brings to society and the economy, relative to what other claimants to the public purse can bring to them.

Marek Kwiek

2. Restructuring of the Higher Educational System in Japan

The higher educational system in Japan dates back to the first years of the Meiji Restoration, and it developed rapidly as the Japanese economy began to grow. Nevertheless, before World War II, universities and other institutions of higher education remained institutions that were intended for the education of a relatively small elite. After World War II, the higher educational system was reformed completely, and it grew rapidly in terms of quantity as well as of quality. Today, Japanese universities face serious challenges because of the decreasing number of college-age students in the population; the increasing competition with the globalized world; and the deteriorating fiscal situation of the Japanese government. This chapter summarizes how the higher educational system in Japan has been reformed over the last 20 years and in which direction the reform is now oriented.

Satoshi Mizobata, Masahiko Yoshii

3. Financing Universities and a Plea for Privatization

An investigation into ways by which universities can escape the financial predicament in which many find themselves should start with an analysis of the current situation and the forces that created it. In earlier work three generations of universities were defined (Wissema, 2009). The Medieval, or First Generation, University was involved in education based on the achievements of antiquity. Universities of this type did not engage in research as we now know it. They rather passed on existing knowledge and discussed interpretations of the classical texts, the infamous scholastic exchanges. Teaching was in Latin, which allowed for considerable mobility of masters and students. The modern scientific method, based on the objective observation of nature, evolved outside universities. Leonardo da Vinci, Galileo Galilei and so many others who made groundbreaking discoveries all worked outside universities. After the Renaissance, some of the groundbreaking scientists did work at universities. Isaac Newton, for instance, was a professor at the University of Cambridge; Herman Boerhaave, who did fundamental research in medicine and botany, worked at Leiden University where he became rector in 1714.

Johan Gooitzen Wissema

4. Student Loans: The Big Debate

In the public policy debate over the funding of higher education, student loans tend to be ‘the elephant in the room’, while the desire to create a perfect economic model of funding overshadows the actual impact of such funding decisions on individuals. Without a doubt, loans and repayment terms are the most pressing issue for students in countries that have tuition fees at the tertiary level, such as the United Kingdom, with the exception of Scotland, Chile or the United States. Coupled with rising unemployment levels and low earnings during the early years of professional life, more and more young people are forced to default on student loans early after graduation. While one could argue that this demonstrates the financial illiteracy of young people and the poor career choices they make while at university, this chapter proposes an alternative view.

Karina Ufert

5. The 2012/13 Reforms of Student Finances and Funding in England: The Implications for the Part-Time Undergraduate Higher Education Sector

Part-time undergraduate higher education is central to lifelong learning and to national skills policies, promoted by the Organisation for Economic Cooperation and Development (OECD, 2012) and others to transform lives and to drive economies forward by providing high-level skills and thus enhancing a country’s competitiveness and economic strength. Part-time provision of higher education is significant for higher education policy too. It can contribute to a more flexible and diverse higher education sector and to help broaden higher education access and social mobility, thus enhancing social justice.

Claire Callender

6. Higher Education Investment Fund: A New Approach for the Private Financing of Higher Education

Developed countries spend between 4.6 and 8 percent of GDP on education (OECD, 2013). Despite the fact that not all education expenses are covered by the Organisation for Economic Cooperation and Development (OECD) measures (FiBS/DIE, 2013), the actual financial need is far higher for a number of reasons. One is that, in almost all countries, many children do not attend early childhood education. This is true even for three- to five- or six-year-old children and, to a much greater extent, for those children younger than three. Since the basic foundations for future education on attainment are laid here, the share of children, especially from disadvantaged families, has to be increased significantly. Research from various fields indicates that particular investments in early childhood are particularly profitable (Cunha et al., 2006).

Dieter Dohmen

7. University-Industry and Business Cooperation: Global Imperatives and Local Challenges — An Example from Portugal

Economic aspects of knowledge have become increasingly important in the era of globalization and international competition on the one hand and in the context of financial austerity on the other hand. In a rather complicated environment of slowing economic growth, a rapidly aging population and increased unemployment, European universities are seen as engines of economic development and problem solving.

Tatyana Koryakina, Pedro Nuno Teixeira, Cláudia S. Sarrico

8. Cooperation between a University and Industry — Good Practices

The wealth of a country is built not by universities but by the business sector. Consequently, the academic sector also has a responsibility to support the development of the business sector. If Europe is to maintain its global competitiveness, it should to develop industries with high total factor productivity. In other words, it is necessary to develop the sectors in which innovative technology and science play an important role. Consequently, relationships between universities and the business are desirable.

Jakub Brdulak

9. Challenges in Research: A Strategic Approach

This chapter represents reflections on the current situation of the financing of higher education, especially in Europe. The views presented here are based on almost 20 years’ experience in working with the external funding of research at the University of Copenhagen, being at the same time involved in national and international professional collaboration within the field of research administration. With a background in Computer Science and Danish Language, my learning about the internationalization of research and education started in the Danish National Union of Students and proceeded into working life with the task to form the first EU research support office in Denmark at the Faculty of Science, University of Copenhagen in 1994. So even though the views presented are based on articles, reports, statistics, documents, and so on, they are interpreted and adopted in a context of the strategic and practical work in managing and leading universities. I will also avoid discussing higher education quality as such: research and education are two sides of the same coin in higher education institutions, and this chapter will reflect on the research side. The impact of the trends in research on higher education quality is complex but significant, as the changes primarily cause instability and uncertainty. On the other side, a strategic approach to tackling these challenges can lead to new potentials for increasing higher education quality.

Jan Andersen


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