Submission Date

5-3-2020

Document Type

Paper

Department

Business & Economics

Second Department

Modern Languages (German)

Adviser

Olga Nicoara

Second Adviser

Robin Clouser

Committee Member

Meghan Jones

Department Chair

Scott Deacle

Department Chair

Matthew Mizenko

Project Description

Countries which have been able to offer free tertiary education are being applauded while the United States tries to find a way to rectify its high tertiary education costs. Germany has accomplished a system of subsidized higher education since the 1950s, making it seem highly successful. In order to investigate the potential benefits of subsidized higher education, this study uses a time series regression analysis to investigate the relationship between tertiary unemployment rate and public spending as a share of the Gross Domestic Product (GDP) in Germany over the period 1990-2017. The regression analysis corrected for multi-collinearity and serial correlation, and to minimize the potential harms of spurious regression and non-stationary variables, a final model in first differences was estimated and interpreted. After controlling for human capital, including parental education, the degree of economic opportunity, the health of the economy and public unemployment benefits, the variable for public expenditure on tertiary education became insignificant. However, as expected, the public spending on the unemployed as a share of GDP entered positively and statistically significant, confirming that the unemployment benefits are a robust determinant of unemployment.

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