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Efficient use of Economic Rents: Reconsidering GATE

Efficient use of Economic Rents: Reconsidering GATE. Elizabeth Ince, Roger Hosein , Martin Franklin. Introduction to the GATE Programme. The GATE Programme.

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Efficient use of Economic Rents: Reconsidering GATE

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  1. Efficient use of Economic Rents: Reconsidering GATE Elizabeth Ince, Roger Hosein, Martin Franklin

  2. Introduction to the GATE Programme

  3. The GATE Programme One of the major goals created for the GATE programme was the attainment of a tertiary participation rate of 60% by 2015. By 2008, the tertiary participation rate within Trinidad and Tobago had increased to 40% (Trinidad and Tobago International Financial Centre). By 2012, the tertiary participation rate stood at 46% (Ministry of Tertiary Education and Skills Training, 2012). In addition to the increase in the tertiary participation rate, the introduction of the GATE Programme “brought with it a mushrooming of private tertiary level institutions.”

  4. Expenditure on and Beneficiaries of GATE Programme Report of the Standing Committee on the GATE Programme (2011)

  5. TLE – The Merit Good Defining the Nature of the good TLE

  6. Sustainability of the GATE Programme

  7. Economic Analysis of the Efficiency of the GATE Programme Horizontal Efficiency vs Vertical Inefficiency

  8. Figure 1: Intended Policy Influence of GATE AS1LR AS0LR AS0SR $P AS1SR ? P0 ? AD1 AD0 0 Y0 Y1 Y

  9. Economic Analysis of the Efficiency of the GATE Programme Case study of Trinidad and Tobago

  10. Comparison of Household Expenditure and Access to GATE by Income Group of Head and Household Income Group Source: Trinidad and Tobago Household Budget Survey 2008/09 *7,090 Households Participated in this Survey

  11. Establishing the Financial Need The True Proportion Needing Financial Assistance

  12. Establishing the Financial Need • Calculation of persons’ financial need, with respect to the amount needed to fund TLE, reveals the extent of their financial need based on their per capita income in comparison to the average national per capita income of Trinidad and Tobago. • The financial need gap is calculated using the national income per capita (Yn) in comparison to the actual average per capita income (Yi) of households, as can be found in the Household Budget Survey • Financial Need =

  13. Income-Contingent Loans Application to Trinidad and Tobago

  14. Mechanics of an ICL

  15. Advantages of an ICL • Students’ repayment is contingent upon future income. Therefore, those benefitting less from their investment in TLE are effectively subsidised. • Repayment commences only after graduate reaches a certain income threshold. • Maximum repayment by the graduate is equal to the original value of the loan in present value terms. • Can include a maximum repayment period after which the loan is forgiven. • Equitable form of student loans • Benefits students of all income brackets

  16. Application to Trinidad and Tobago NB: The proposed ICL structure is a work in progress.

  17. Conclusion • Universal subsidising of tertiary level education within Trinidad and Tobago is an inefficient use of rents from the sale of petroleum as can be seen in the: • Review of the 2008/09 Household Budget Survey • Review of the Financial Need of Households with persons pursuing TLE • Use of an Income-Contingent Loan efficiently subsidises the merit good TLE for students.

  18. Thank you.

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