Private Funding of Higher Education – Human Capital as an Asset Class

Against the background of potentially increasing demand for and supply of private capital for tertiary education in an imperfect capital market, this research project aims to explore the opportunities for future development of a broader private market for education finance in more depth. In particular we focus on the risk of human capital investment from the perspective of a financial investor seeking to diversify her/his portfolio. The risk analysis refers not only to default and underperformance risks but also to the covariance with other asset classes.

The analysis contains the development of an extended theoretical model to include the effects of demographic change on the characteristics of human capital as an asset class. An empirical analysis on the diversification potential of human capital based assets will be carried out. We will distinguish different fields of education and carry out spanning tests over a period of 30 years. Based on results of two surveys among students and financial services providers we try to account for selection effects of different financial instruments and their impact on the diversification potential. The results of our project should provide new information to policy makers on the suitable design of measures to channel financial investments to education finance.

Duration: April 2011 - September 2012

Download Project Presentation

• Dr. Grit Mühler, ZEW – Leibniz Centre for European Economic Research, Department of Labour Markets, Human Resources and Social Policy
• Dr. Peter Westerheide, ZEW – Leibniz Centre for European Economic Research, Department of International Finance and Financial Management
• Tim-Alexander Kröncke, ZEW – Leibniz Centre for European Economic Research, Department of International Finance and Financial Management
• Dr. Michael Schröder, ZEW – Leibniz Centre for European Economic Research, Department of International Finance and Financial Management
• Dr. Maresa Sprietsma, ZEW – Leibniz Centre for European Economic Research, Department of Labour Markets, Human Resources and Social Policy
• Prof. Dr. Hessel Oosterbeek, University of Amsterdam, Amsterdam School of Economics
• Assistant Prof. Miguel Palacios, PhD, Vanderbilt University, Owen Graduate School of Management