The Quebec government has just released a collection of studies on financing education, including this one ( 121-page pdf, in French ) written by Valérie Vierstraete, a professor of economics at the Université de Sherbrooke. It addresses exactly the sort of questions that need to be asked and answered in this debate: what would happen to university enrollment if we increased/decreased/held constant tuition fees, and what are the implications for government finances?

After a certain amount of establishing the context, the paper starts with a simple probit model of university attendance decisions. Since she was obliged to work with data from Quebec, identifying variations in university participation rates that were due to variation in tuition fees is somewhat problematic: tuition fees were frozen throughout most of her sample. Although we might want to take the precision of some of these estimates with a grain of salt, her results are similar to what we've seen elsewhere, so there's no reason to dismiss them out of hand.

The next step is some policy experiments around the base case scenario of keeping tuition at $1617.76/year. She considers several scenarios, but I'll talk about three (the other scenarios involved only minor variations around the base case and generated negligible changes):

Free tuition Increase tuition by 50% to $2456.56, which is half the average in the rest of Canada, and Tripling fees to $4893.13, the average in Canada outside Quebec.

Professor Vierstraete is careful to track the effect of these changes through the tax system: among other things, tuition fees generate tax credits, and they also affect levels for financial assistance. Using a student population of 230,000 as a base case, she obtains the following effects on enrollment:

Free tuition: 17,993 more students (7.8% increase) 50% increase: 5788 fewer students (2.5% decrease) 300% increase: 22,120 fewer students (9.6% decrease)

Again, since all three scenarios involve going way outside the observed range of variation of tuition fees, these point estimates should definitely not be taken as definitive. It would have been nice to see some error bands.

The next issue is what effect that these would have on government finances. Once again, she does the hard work of (among other things) tracking funding arrangements between Ottawa and Quebec City, and between Quebec City and the universities. For the cases in which tuition fees are raised, it is supposed that only half of the increase is clawed back in the form of lower transfers from the provincial government to the universities.

Free tuition: Government expenditures increase by $153m; university funding levels stay the same. 50% increase: Government expenditures reduced by $7.8m; universities receive an extra $67m. 300% increase: Government expenditures reduced by $22.4m; universities receive $246m more than before.

Professor Vierstraete doesn't make any policy recommendations (that wasn't her job here), but her results make it possible for us to make some rough estimates about the effect of these sorts of policy initiatives.

Eliminating tuition fees would increase university enrollments, but at the cost of an additional $8500 for each of the 17,993 new students. Since more than 90% of those extra expenditures would be going to the 230,000 students who were attending university anyway, this is a remarkably wasteful way of increasing PSE enrollment.

Although the link between PSE participation and tuition fees is small, it is not zero: tripling tuition fees would force out almost 10% of the students, particularly those from low-income families in small towns. But tripling tuition fees would also mean that universities would have an extra $246m: more than enough to pay the $108m it would cost to offer free tuition to those 22,000 students whose financial situation is too precarious to handle the tuition fee increase. And if they wanted, they could even afford the $88m cost of waiving fees for the 18,000 potential students who would have come if tuition were free. And there would still be $50m left over for other things, in addition to the $20m freed up in the provincial budget.

In principle, a policy of raising tuition fees to the national average and then helping those who are in financial difficulty could have the same effect on post-secondary enrollment as a policy of free tuition. But while free tuition would involve increasing public expenditures by $150m, a policy of higher tuition could actually reduce public expenditures.

Since these estimates are subject to a certain amount of error, they can't be used to justify an immediate increase of %300 in tuition fees. But they certainly make it plain that the appropriate policy path involves increasing tuition fees and using these revenues to help students in financial need.

