Three essays on the economics of higher education

This thesis is comprised of three essays that examine three contemporary themes in UK higher education that have emerged, particularly over the past two decades, within an expanding higher education sector. The first essay focuses on the issue of Vice Chancellor (VC) pay, which has risen considerably in real terms since the early 1990s. Vice Chancellors are among the highest paid public sector CEOs and the level and annual increase in pay generates an annual furore in the popular media and from teaching and lecturers’ unions. Specifically, we investigate whether VC pay awards are justified, given that VCs now require greater managerial skills than in the past due to the complexity and the size of the institutions they now manage. We find that VC pay is related to success in furthering university expansion and is associated with success in widening participation in accordance with current government policy, which suggests that there may be scope in introducing some performance element in VC pay determination. There is also evidence that internal pay structure and external comparable pay are important in determining VC pay. The second essay is set against the backdrop of rising student debt and examines student debt expectation. We offer a novel contribution to the limited literature that exists on this issue. We find that expected debt is related to student demographic and socio-economic characteristics, future earnings expectations, student time preference and risk taking behaviour. Moreover, the evidence suggests that the current system of student financial support has little effect on debt expectations and may compromise HE participation particularly amongst students in the lower socio-economic groups. The final essay investigates the upward drift in the percentage share of ‘good’ degree classifications in UK higher education, which increased considerably since the mid- 2000s and coincides with a rise in the maximum limit universities are allowed to charge potential students for tuition. We find evidence of grade inflation in UK higher education since the mid-2000s which coincides with the sharp increase in fees students were obliged to pay. Thus, degree classifications may lose their worth as signals of graduate ability and the current system of degree classification may need some revision if correct signals of graduate ability and effort are to be sent to interested parties.